Krause Industries' balance sheet at December 31, 2012, is presented below.
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KRAUSE INDUSTRIES
Balance Sheet
December 31, 2012
Assets
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Current assets
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Cash
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$7,500
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Accounts receivable
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82,500
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Finished goods inventory (2,000 units)
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30,000
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Total current assets
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120,000
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Property, plant, and equipment
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Equipment
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$40,000
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Less: Accumulated depreciation
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10,000
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30,000
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Total assets
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$150,000
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Liabilities and Stockholders' Equity
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Liabilities
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Notes payable
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$25,000
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Accounts payable
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45,000
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Total liabilities
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70,000
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Stockholders' equity
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Common stock
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$50,000
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Retained earnings
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30,000
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Total stockholders' equity
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80,000
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Total liabilities and stockholders' equity
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$150,000
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Additional information accumulated for the budgeting process is as follows.
Budgeted data for the year 2013 include the following.
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4th Qtr.
of 2013
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Year
2013
Total
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Sales budget (8,000 units at $35)
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$84,000
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$280,000
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Direct materials used
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17,000
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69,400
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Direct labor
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12,500
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56,600
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Manufacturing overhead applied
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10,000
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54,000
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Selling and administrative expenses
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18,000
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76,000
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To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2013, 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 $4,000 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 30% 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 2013, the company expects to purchase additional equipment costing $19,000. It expects to pay $8,000 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2013, includes amounts due suppliers (see above) plus other accounts payable of $5,700. In 2013, the company expects to declare and pay a $5,000 cash dividend. Unpaid income taxes at December 31 will be $5,000. The company's cash budget shows an expected cash balance of $7,950 at December 31, 2013.
Instructions
Prepare a budgeted income statement for 2013 and a budgeted balance sheet at December 31, 2013. In preparing the income statement, you will need to compute cost of goods manufactured (direct materials +direct labor+manufacturing overhead) and finished goods inventory (December 31, 2013).