Question

Krause Industries’ balance sheet at December 31, 2019, is presented below. KRAUSE INDUSTRIES Balance Sheet December...

Krause Industries’ balance sheet at December 31, 2019, is presented below.

KRAUSE INDUSTRIES
Balance Sheet
December 31, 2019

Assets

Current Assets

    Cash

$7,500

    Accounts receivable

73,500

    Finished goods inventory (1,500 units)

26,840

      Total current assets

107,840

Property, Plant, and Equipment

    Equipment

$40,780

    Less: Accumulated depreciation

10,490

30,290

            Total assets

$138,130

Liabilities and Stockholders' Equity

Liabilities

    Notes payable

$25,730

    Accounts payable

47,150

      Total liabilities

72,880

Stockholders' Equity

    Common stock

$39,110

    Retained earnings

26,140

      Total stockholders' equity

65,250

            Total liabilities and stockholders' equity

$138,130



Budgeted data for the year 2020 include the following.

2020

Quarter 4

Total

Sales budget (8,000 units at $32) $76,800 $256,000
Direct materials used 11,860 62,500
Direct labor 12,500 50,900
Manufacturing overhead applied 10,000 48,600
Selling and administrative expenses 17,420 75,000


To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2020, 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 2020, the company expects to declare and pay an $10,720 cash dividend.

The company’s cash budget shows an expected cash balance of $5,880 at December 31, 2020. 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 2020, the company expects to purchase additional equipment costing $9,680. $12,274 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 $10,700 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, 2020, includes amounts due suppliers (see above) plus other accounts payable relating to manufacturing overhead of $7,710. Unpaid income taxes at December 31 will be $5,900.

(a)

Prepare a budgeted statement of cost of goods sold.

Homework Answers

Answer #1

Answer : Preparation of a budgeted statement of cost of goods sold :

Krause Industries
Budgeted Cost Of Goods Sold
For Year Ending December31,2020
Finished Goods Inventory, 1/1/20 26,840
Add : Cost Of Goods Manufactured
    Direct Materials Used 62,500
    Direct Labour 50,900
    Manufacturing Overhead Applied 48,600
162,000
Cost of goods available for sale 188,840
Less : Finished goods inventory, 12/31/20 (2500 units x $18) 45,000
Cost of Goods sold 143,840
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