Question
Problem 21-6A (Part Level Submission) Krause Industries balance sheet at December 31, 2016, is presented below. KRAUSE INDUSTRIES Balance Sheet December 31, 2016 Assets Current
Problem 21-6A (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 | $7,500 | |||||
| Accounts receivable | 73,500 | |||||
| Finished goods inventory (1,500 units) | 24,000 | |||||
| Total current assets | 105,000 | |||||
| Property, Plant, and Equipment | ||||||
| Equipment | $40,000 | |||||
| Less: Accumulated depreciation | 10,000 | 30,000 | ||||
| Total assets | $135,000 | |||||
| Liabilities and Stockholders' Equity | ||||||
| Liabilities | ||||||
| Notes payable | $25,000 | |||||
| Accounts payable | 45,000 | |||||
| Total liabilities | 70,000 | |||||
| Stockholders' Equity | ||||||
| Common stock | $40,000 | |||||
| Retained earnings | 25,000 | |||||
| Total stockholders' equity | 65,000 | |||||
| Total liabilities and stockholders' equity | $135,000 | |||||
Budgeted data for the year 2017 include the following.
| 2017 | ||||
| Quarter 4 | Total | |||
| Sales budget (8,000 units at $32) | $76,800 | $256,000 | ||
| Direct materials used | 11,000 | 62,500 | ||
| Direct labor | 12,500 | 50,900 | ||
| Manufacturing overhead applied | 10,000 | 48,600 | ||
| Selling and administrative expenses | 15,000 | 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 $8,000 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 $9,000. $7,000 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 $8,000 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 $7,200. Unpaid income taxes at December 31 will be $5,000.
Prepare a budgeted statement of cost of goods sold.
| KRAUSE INDUSTRIES Budgeted Cost of Goods Sold For the Quarter Ending December 31, 2017For the Year Ending December 31, 2017December 31, 2017 | ||||
| Finished Goods Inventory, 1/1/17Finished Goods Inventory, 12/31/17Direct LaborCost of Goods Available For SaleSalesCost of Goods SoldManufacturing Overhead AppliedInterest ExpenseSelling and Administrative ExpensesIncome Tax ExpenseNet Income / (Loss)Cost of Goods ManufacturedDirect Materials Used | $ | |||
| Finished Goods Inventory, 1/1/17Manufacturing Overhead AppliedCost of Goods SoldSalesSelling and Administrative ExpensesCost of Goods ManufacturedIncome Tax ExpenseNet Income / (Loss)Interest ExpenseDirect Materials UsedDirect LaborFinished Goods Inventory, 12/31/17Cost of Goods Available For Sale | ||||
| Cost of Goods Available For Sale Cost of Goods Manufactured Cost of Goods Sold Finished Goods Inventory, 12/31/17 Finished Goods Inventory, 1/1/17 Direct Materials Used Direct Labor Manufacturing Overhead Applied Income Tax Expense Interest Expense Net Income / (Loss) Sales Selling and Administrative Expenses | $ | |||
| Net Income / (Loss) Sales Income Tax Expense Interest Expense Selling and Administrative Expenses Cost of Goods Available For Sale Finished Goods Inventory, 12/31/17 Cost of Goods Manufactured Manufacturing Overhead Applied Finished Goods Inventory, 1/1/17 Cost of Goods Sold Direct Materials Used Direct Labor | ||||
| Cost of Goods Manufactured Manufacturing Overhead Applied Finished Goods Inventory, 1/1/17 Direct Materials Used Net Income / (Loss) Direct Labor Income Tax Expense Interest Expense Sales Cost of Goods Sold Finished Goods Inventory, 12/31/17 Selling and Administrative Expenses Cost of Goods Available For Sale | ||||
| Income Tax ExpenseFinished Goods Inventory, 1/1/17Finished Goods Inventory, 12/31/17SalesInterest ExpenseDirect LaborDirect Materials UsedNet Income / (Loss)Cost of Goods SoldSelling and Administrative ExpensesCost of Goods Available For SaleManufacturing Overhead AppliedCost of Goods Manufactured | ||||
| Interest ExpenseCost of Goods Available For SaleCost of Goods SoldSalesFinished Goods Inventory, 1/1/17Net Income / (Loss)Direct Materials UsedFinished Goods Inventory, 12/31/17Selling and Administrative ExpensesCost of Goods ManufacturedDirect LaborManufacturing Overhead AppliedIncome Tax Expense | ||||
| Net Income / (Loss)SalesFinished Goods Inventory, 1/1/17Finished Goods Inventory, 12/31/17Selling and Administrative ExpensesDirect Materials UsedCost of Goods Available For SaleDirect LaborManufacturing Overhead AppliedIncome Tax ExpenseCost of Goods SoldCost of Goods ManufacturedInterest Expense | $ | |||
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