Krause Industries' balance sheet at December 31, 2019, is presented below. KRAUSE INDUSTRIES Balance Sheet December 31, 2019 Assets Current Assets Cash $7,500 Accounts receivable 73,500 Finished goods inventory (1,500 units) 26,210 Total current assets 107,210 Property, Plant, and Equipment Equipment $40,260 Less: Accumulated depreciation 10,420 29,840 Total assets $137,050 Liabilities and Stockholders' Equity Liabilities Notes payable $26,220 Accounts payable 45,730 Total liabilities 71,950 Stockholders' Equity Common stock $37,190 Retained earnings 27,910 Total stockholders' equity 65,100 Total liabilities and stockholders' equity $137,050 Budgeted data for the year 2020 include the following. 2020 Quarter 4 Total Sales budget (8,000 units at $32) $76,800 $256,000 Direct materials used 13,480 62,500 Direct labor 12,500 50,900 Manufacturing overhead applied 10,000 48,600 Selling and administrative expenses 17,760 75,000 To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2020, 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 2020, the company expects to declare and pay an $8,460 cash dividend. The company's cash budget shows an expected cash balance of $5,880 at December 31, 2020. 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 2020, the company expects to purchase additional equipment costing $10,340.$4,846 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 $8,450 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, 2020, includes amounts due suppliers (see above) plus other accounts payable relating to manufacturing overhead of $8,530. Unpaid income taxes at December 31 will be $6,680. KRAUSE INDUSTRIES Budgeted Cost of Goods Sold For the Year Ending December 31, 2020 Finished Goods Inventory, 1/1/20 $ 26210 Cost of Goods Manufactured V Direct Materials Used $ 62500 Direct Labor 50900 Manufacturing Overhead Applied 48600 162000 Cost of Goods Available For Sale 188210 Finished Goods Inventory, 12/31/20 45000 i Cost of Goods Sold $ 143210 KRAUSE INDUSTRIES Budgeted Income Statement For the Year Ending December 31, 2020 V Sales Revenue $ 256000 Cost of Goods Sold 143210 i Gross Profit 112790 Selling and Administrative Expenses 75000 i Income from Operations 37790 Interest Expense 3500 i Income before Income Taxes 34290 Income Tax Expense 13716 Net Income /(Loss) $ 20574 KRAUSE INDUSTRIES Budgeted Retained Earnings Statement For the Year Ending December 31, 2020 Retained Earnings, 1/1/20 27910 Add Net Income/(Loss) 20574 48484 Less V: Dividends 8460 i Retained Earnings, 12/31/20 40024 KRAUSE INDUSTRIES Budgeted Balance Sheet Assets $ $ $ $ Liabilities and Stockholders' Equity $ $ v $ $ $
