Problem 21-6A (Part Level Submission)

Krause Industries balance sheet at December 31, 2016, is presented below.

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 $8,740 cash dividend. The companys 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 $9,360. $7,071 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 $9,850 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 $9,240. Unpaid income taxes at December 31 will be $6,280.

A.

B. Prepare a budgeted multiple step income statement for 2017

KRAUSE INDUSTRIES Balance Sheet December 31, 2016 Assets Current Assets Cash Accounts receivable $7,500 73,500 24,020 Finished goods inventory (1,500 units) Total current assets 105,020 Property, Plant, and Equipment Equipment Less: Accumulated depreciation $40,910 10,780 30,130 $135,150 Total assets Liabilities and Stockholders' Equity Liabilities Notes payable Accounts payable $26,180 45,240 Total liabilities 71,420 Stockholders' Equity Common stock $37,700 26,030 Retained earnings Total stockholders' equity 63,730 Total liabilities and stockholders' equity $135,150 Budgeted data for the year 2017 include the following. 2017 Quarter 4 Total Sales budget (8,000 units at $32) Direct materials used Direct labor $76,800 12,670 12,500 10,000 16,850 $256,000 62,500 50,900 50,340 75,000 Manufacturing overhead applied Selling and administrative expenses (a) Your answer is partially correct. Try again. 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 26,160 Cost of Goods Manufactured Direct Materials Used 62,500 $1 Direct Labor 50,900 Manufacturing Overhead Applied 49,630 163,030 Cost of Goods Available For Sale 189,190 Finished Goods Inventory, 12/31/17 4 45,000 X Cost of Goods Sold 144,190