Question

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)					25,720
Total current assets					106,720
Property, Plant, and Equipment
Equipment			$40,340
Less: Accumulated depreciation			10,240		30,100
Total assets					$136,820
Liabilities and Stockholders' Equity
Liabilities
Notes payable					$27,220
Accounts payable					47,250
Total liabilities					74,470
Stockholders' Equity
Common stock			$34,840
Retained earnings			27,510
Total stockholders' equity					62,350
Total liabilities and stockholders' equity					$136,820

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		14,810		62,500
Direct labor		12,500		50,900
Manufacturing overhead applied		10,000		51,200
Selling and administrative expenses		16,020		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 $8,870 cash dividend.

The company’s 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 $11,050. $10,607 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 $10,290 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 $8,750. Unpaid income taxes at December 31 will be $6,270.

A) Prepare a budgeted statement of cost of goods sold.

B) Prepare a budgeted multiple step income statement for 2017

C) Prepare retained earnings statement for 2017

D) Prepare a budgeted classified balance sheet at December 31,2017

Answer 1