Problem 21-6A (Part Level Submission) Krause Industries' balance sheet at December 31, 2013, is presented below. KRAUSE INDUSTRIES Balance Sheet December 31, 2013 Assets Current Assets Cash $7,500 Accounts receivable 82,500 Finished goods inventory (2,000 units) 33,100 Total current assets $123,100 Property, Plant, and Equipment Equipment $41,550 Less: Accumulated depreciation 11,550 30,000 Total assets $153,100 Liabilities and Stockholders' Equity Liabilities Notes payable $26,550 Accounts payable 46,550 Total liabilities 73,100 Stockholders' Equity Common stock $48,450 Retained earnings 31,550 Total stockholders' equity 80,000 Total liabilities and stockholders' equity $153,100 Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2014 include the following. Sales budget (8,000 units at $35) Direct materials used Direct labor Manufacturing overhead applied Selling and administrative expenses 4th Qtr. of 2014 Year 2014 Total $84,000 $280,000 13,900 69,400 12,500 56,600 10,000 52,450 16,450 76,000 To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2014, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $11,530 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. 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 2014, the company expects to purchase additional equipment costing $20,550. It expects to pay $9,550 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2014, include amounts due suppliers (see above) plus other accounts payable of $7,250. In 2014, the company expects to declare and pay an $6,550 cash dividend. Unpaid income taxes at December 31 will be $6,550. The company's cash budget shows an expected cash balance of $7,950 at December 31, 2014. Your answer is correct. Prepare a budgeted income statement for 2014. KRAUSE INDUSTRIES Budgeted Income Statement For the Year Ending December 31, 2014 Sales 280,000 Cost of Goods Sold Finished Goods Inventory, January 1 33,100 Cost of Goods Manufactured 178,450 Cost of Goods Available For Sale 211,550 Finished Goods Inventory, December 31 60,000 Cost of Goods Sold 151,550 Gross Profit 128,450 Selling and Administrative Expenses 76,000 Income from Operations 52,450 Interest Expense 3,500 Income before Income Taxes 48,950 Income Tax Expense 19,580 Net Incomel (Loss) 29,370 KRAUSE INDUSTRIES Budgeted Balance Sheet December 31, 2014 Assets Revenues Cash 7,500 Accounts Receivable 33,000 Finished Goods Inventory 60,000 Current Assets 100,500 Current Assets Equipment Less Accumulated Depreciation Total Assets Liabilities and Stockholders' Equity Current Liabilities Notes Payable Accounts Payable Income Taxes Payable Total Liabilities $ Stockholders' Equity Common Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity