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 $9,720 cash dividend. The companys 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 $9,900. $9,512 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 $10,080 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 $8,300. Unpaid income taxes at December 31 will be $7,260.

KRAUSE INDUSTRIES Balance Sheet December 31, 2019 Assets Current Assets Cash $7,500 Accounts receivable 73,500 Finished goods inventory (1,500 units) 25,570 Total current assets 106,570 Property, Plant, and Equipment Equipment $40,580 Less: Accumulated depreciation 10,550 30,030 Total assets $136,600 Liabilities and Stockholders' Equity Liabilities Notes payable $27,670 Accounts payable 46,870 Total liabilities 74,540 Stockholders' Equity Common stock $36,590 Retained earnings 25,470 Total stockholders' equity 62,060 Total liabilities and stockholders' equity $136,600 Budgeted data for the year 2020 include the following. 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 11,140 62,500 Direct labor 12,500 50,900 Manufacturing overhead applied 10,000 48,600 Selling and administrative expenses 16,090 75,000 KRAUSE INDUSTRIES Budgeted Balance Sheet December 31, 2020 Assets Current Assets Cash $ Accounts Receivable Finished Goods Inventory Total Current Assets $ Property, Plant and Equipment Equipment $ Less : Accumulated Depreciation Total Assets Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 46870 Income Taxes Payable 7 7700 Total Current Liabilities $ Notes Payable Total Liabilities $ Stockholders' Equity Common Stock $ 36590 Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity