Question

industries' balance sheet at December 31, 2015, is presented below.

	INDUSTRIES Balance Sheet December 31, 2015
	Assets
	Current assets
	Cash			$7,400
	Accounts receivable			82,000
	Finished goods inventory (1,500 units)			29,500
	Total current assets			118,900
	Equipment	$39,500
	Less: Accumulated depreciation	10,000		29,500
	Total assets			$148,400
	Liabilities and Shareholders' Equity
	Liabilities
	Notes payable			$24,500
	Accounts payable			44,500
	Total liabilities			69,000
	Shareholders’ equity
	Common stock	$49,500
	Retained earnings	29,900
	Total shareholders’ equity			79,400
	Total liabilities and shareholders’ equity			$148,400

Budgeted data for the year 2016 include the following.

		Q4 of 2016			Year 2016 Total
	Sales budget (8,000 units at $36)	$86,400			$288,000
	Direct materials used	16,500			69,500
	Direct labor	12,000			55,500
	Manufacturing overhead applied	10,000			28,000
	Selling and administrative expenses	17,500			75,500

To meet sales requirements and to have 2,000 units of finished goods on hand at December 31, 2016, the production budget shows 8,500 required units of output. The total unit cost of production is expected to be $18. Kurian Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $4,000 for depreciation on equipment. The company expects interest expense to be $3,000 for the year and income taxes to be 20% of income before income taxes.

All sales and purchases are on account. The company expects to collect 60% of the quarterly sales in cash within the quarter and the remainder in the following quarter. It pays direct materials purchased from suppliers 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 2016, the company expects to purchase additional equipment costing $17,500. It expects to pay $7,500 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,000, above). Accounts payable at December 31, 2016, includes amounts due to suppliers (see above) plus other accounts payable of $5,200. In 2016, the company expects to declare and pay a $4,500 cash dividend. Unpaid income taxes at December 31 will be $3,780. The company's cash budget shows an expected cash balance of $45,970 at December 31, 2016.

Prepare a budgeted balance sheet at December 31, 2016.

Answer 1