Question

Problem 10-42A (Part Level Submission) Kurian Industries' balance sheet at December 31, 2015, is presented below. KURIAN INDUSTRIES Balance Sheet December 31, 2015 Assets Current assets     Cash $7,600     Accounts receivable 82,000     Finished goods inventory (2,200 units) 30,100     Total current assets 119,700 Equipment $40,300 Less: Accumulated depreciation 10,700 29,600         Total assets $149,300 Liabilities and Shareholders' Equity Liabilities     Notes payable $25,500     Accounts payable 45,100     Total liabilities 70,600 Shareholders’ equity     Common stock $49,900     Retained earnings 28,800         Total shareholders’ equity 78,700           Total liabilities and shareholders’ equity $149,300 Budgeted data for the year 2016 include the following. Q4 of 2016 Year 2016 Total Sales budget (8,500 units at $38) $96,900 $323,000 Direct materials used 17,400 69,600 Direct labor 12,900 55,500 Manufacturing overhead applied 10,800 72,300 Selling and administrative expenses 18,200 76,200 To meet sales requirements and to have 3,100 units of finished goods on hand at December 31, 2016, the production budget shows 9,400 required units of output. The total unit cost of production is expected to be $21. Kurian Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $4,300 for depreciation on equipment. The company expects interest expense to be $3,800 for the year and income taxes to be 40% 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 $17,700. It expects to pay $8,100 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,800, 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 $5,300 cash dividend. Unpaid income taxes at December 31 will be $9,672. The company's cash budget shows an expected cash balance of $15,872 at December 31, 2016.

Prepare a budgeted income statement for 2016. In preparing the income statement, you will need to calculate the cost of goods manufactured (materials + labour + overhead) and finished goods inventory (December 31, 2016). (Round answers to 0 decimal places, e.g. 125.) Prepare a budgeted cost of goods sold statement for 2016.

Answer 1

KURIAN INDUSTRIES Budgeted Income Statement For the year ending December 31,2016
Sales		$323,000
Cost of Goods sold
Finished goods Inventory January 1	$30,100
Cost of goods manufactured (69,600+55,500+72,300)	$197,400
Cost of goods available for sale	$227,500
Finished goods Inventory December 31	$65,100
Cost of Goods sold		$162,400
Gross profit		$160,600
Selling and Administration expense		$76,200
Income from operation		$84,400
Interest expense		$3,800
Income before Income taxes		$80,600
Income tax expense (80,600*40%)		$32,240
Net Income/(Loss)		$48,360

KURIAN INDUSTRIES Budgeted Cost of goods sold For the year ending December 31,2016
Finished goods Inventory December 31		$30,100
Add: Cost of goods manufactured
Direct material used	$69,600
Direct labour	$55,500
Manufacturing Overhead Applied	$72,300	$197,400
Cost of Goods available for sale		$227,500
Less: Finished goods Inventory December 31 (3,100*$21)		$65,100
Cost of goods sold		$162,400

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