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Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:

Beech Corporation Balance Sheet June 30
Assets
Cash	$   92,000
Accounts receivable	130,000
Inventory	48,600
Plant and equipment, net of depreciation	216,000
Total assets	$ 486,600
Liabilities and Stockholders’ Equity
Accounts payable	$   77,000
Common stock	329,000
Retained earnings	80,600
Total liabilities and stockholders’ equity	$ 486,600

rev: 09_17_2014_QC_54310

Beech’s managers have made the following additional assumptions and estimates:

1.	Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.
2.	All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.
3.	Each month’s ending inventory must equal 30% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
4.	Monthly selling and administrative expenses are always $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.
5.	The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required:

1.	Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

        

  

2-a.	Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

          

  

2-b.	Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

        

  

3.	Prepare an income statement for the quarter ended September 30.

        

  

4.	Prepare a balance sheet as of September 30.

        

Answer 1

		Schedule of Expected Cash Collections
					July	August	September	Quarter
From Accounts receivable					130,000			130,000
From July sales		(270,000*35%;65%)			94500	175500		270000
From August sales		(290,000*35%;65%)				101500	188500	290000
From September sales		(280,000*35%)					98000	98000
Total cash collections					224,500	277000	286500	788,000
			Accounts receivable 280,000*65%=				182000
2-a)		Merchandise Purchase Budget
					July	August	September	Total
Budgeted cost of goods sold			(60% of sales)		162000	174000	168000	504000
Add:Desired ending merchandise inventory					52200	50400	54000	54000
total needs					214200	224400	222000	558000
less: Beginning merchandise inventory					48,600	52200	50400	48,600
Required purchased					165,600	172200	171600	509,400
2-b)		Schedule of Cash Disbursement for purchases
					July	August	September	Total
From Accounts payable					77,000			77,000
From July purchases					66240	99360		165600
From august purchases						68880	103320	172200
From September purchases							68640	68640
total cash disbursements					143,240	168240	171960	483,440
		Accounts payable		171600*60%		102960
3)		Income Statement
	Sales						840000
	cost of goods sold						504000
	Gross profit						336000
	Selling and administrative expense				(50000*3)		150000
	net operating income						186000
	interest expense						0
	net income (loss)						186000
4)		Balance sheet
	Assets
	Cash						261,560
	Account receivable						182000
	inventory						54000
	Plant and Equipment,net						201000
	Total Assets						698560
	Liabilities and Stockholders Equity
	Accounts payable						102960
	Capital Stock						329,000
	Retained earnings						266600
	Total liabilities & Stockholder's Equity						698560