Reference no: EM13858092
Krause Industries' balance sheet at December 31, 2013, is presented below.
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 $13,562 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.
Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2014 include the following.
4th Qtr. of 2014 Year 2014 Total
Sales budget (8,000 units at $35) $84,000 $280,000
Direct materials used 11,360 69,400
Direct labor 12,500 56,600
Manufacturing overhead applied 10,000 51,180
Selling and administrative expenses 15,180 76,000
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 $21,820. It expects to pay $10,820 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 $8,520. In 2014, the company expects to declare and pay an $7,820 cash dividend. Unpaid income taxes at December 31 will be $7,820. The company's cash budget shows an expected cash balance of $7,950 at December 31, 2014.
Prepare a budgeted income statement for 2014.
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