23-6A (Part Level Submission) Krause Industries' balance sheet at December 31, 2016, is presented below. KRAUSE INDUSTRIES Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts receivable Finished goods inventory (1,500 units) Total-current assets Property, Plant, and Equipment Equipment Less: Accumulated depreciation Total assets $7,500 73,500 4 26,090 107,090 $40,520 10,470 30,050 $137,140 Liabilities and Stockholders' Equity Liabilities Notes payable $27,210 Accounts payable 47,580 Total liabilities 74,790 Stockholders' Equity Common stock $37,330 Retained earnings 25,020. Total stockholders' equity 62,350 Total liabilities and stockholders' equity $137,140 Budgeted data for the year 2017 include the following. 2017 Quarter 4 Sales budget (6,000 units at $32) $76,800 Total $256,000 Direct materials used 14,840 62,500 Direct labor 12,500 50,900 Manufacturing overhead applied 10,000 Selling and administrative expenses 16,590 50,110 75,000 To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. Krause uses the first-in, first-out (FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. In 2017, the company expects to declare and pay an $9,510 cash dividend. The company's cash budget shows an expected cash balance of $5,880 at December 31, 2017. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2017, the company expects to purchase additional equipment costing $11,530. $9,350 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. Krause expects to pay $9,010 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2017, includes amounts due suppliers (see above) plus other accounts payable of $9,760. Unpaid income taxes at December 31 will be $5,870. S (a) Your answer has been saved and sent for grading. See Gradebook for score details. Prepare a budgeted statement of cost of goods sold. KRAUSE INDUSTRIES Budgeted Cost of Goods Sold For the Year Ending December 31, 2017 Finished Goods Inventory, 1/1/17 Cost of Goods Manufactured Direct Materials Used Direct Labor Manufacturing Overhead Applied Cost of Goods Available For Sale Finished Goods Inventory, 12/31/17 Cost of Goods Sold $ 26,090 62,500 50,900 50,110 163,510 189,600 45,000 144,600 (b) Your answer has been saved and sent for grading. See Gradebook for score details. Prepare a budgeted multiple-step income statement for 2017. KRAUSE INDUSTRIES Budgeted Income Statement For the Year Ending December 31, 2017 Sales Revenue Cost of Goods Sold Gross Profit Selling and Administrative Expenses Income from Operations Interest Expense Income before Income Taxes Income Tax Expense Net Income/ (Loss) $ 256,000 144,600 111,400 75,000 36,400 3,500 32,900 13,160 $ 19,740 (c) Prepare retained earnings statement for 2017. (List items that increase retained earnings first.) KRAUSE INDUSTRIES Budgeted Retained Earnings Statement For the Year Ending December 31, 2017 Retained Earnings, 1/1/17 Add Net Income/ (Loss) Less Dividends Retained Earnings 12/31/17