Question

Required information The following information applies to the questions displayed below.) 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 Accounts receivable Inventory Plant and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Coomon stock Retained earnings Total liabilities and stockholders' equity $ 71,000 131.000 45.500 215,000 $ 462,500 $ 76,000 307.000 79.500 $ 462.500 Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $260,000, $280,000, $270,000, and $290,000, 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 25% of the cost of next month's sales. The cost of goods sold is 70% 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 $48,000. Each month $5,000 of this total amount is depreciation expense and the remaining $43,000 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. 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. 3. Prepare an income statement that computes net operating income for the quarter ended September 30. 4. Prepare a balance sheet as of September 30.

Answer 1

July 260,000 August September October 280,000 270,000 290,000 sales Beech Corporation 1.Schedule of Expected Cash Collections Month July August September Quarter From accounts receivable 131,000 131,000 From July sales 91,000 169,000 260,000 From August sales 98,000 182,000 280,000 From September sales 94,500 94,500 Total cash collections | 222,000 267,000 276,500 765,500 collection =35 % * current month sales +65% of last month sales Total 567,000 Beech Corporation 2a. Merchandise Purchases Budget July August September Budgeted cost of goods sold (70% of sales) 182,000 | 196,000 189,000 Add: Desired ending merchandise inventory (25% of next month COGS) 49,000 47,250 43,500 Total needs 231,000 243,250 232,500 Less: Beginning merchandise inventory 45,500 49,000 47,250 Required purchases 185,500 194,250 185,250 43,500 610,500 45,500 565,000 Beech Corporation 2b.Schedule of Cash Disbursements for Purchases | July August September From accounts payable 76,000 From July purchases 74,200 111,300 From August purchases 77,700 116,550 From September purchases 74,100 Total cash disbursements 150,200 189,000 190,650 Disbursement = 40 % * current month Purchase + 60% of last month Purchase Total 76,000 185,500 194,250 _74,100 529,850

Beech Corporation 3.Income Statement For the Quarter Ended September 30 Sales Cost of goods sold Gross margin Selling and administrative expenses (48000*3) Net operating income Interest expense Net income 810,000 567,000 243,000 144,000 99,000 Beech Corporation 4.Balance Sheet September 30. Assets Cash* Accounts receivable (270000*65%) Inventory Plant and equipment, net =215000-5000* 3 177,650 175,500 43,500 200,000 99,000 596,650 July | 71,000 222,000 293,000 August September Quarter 99,800 134,800 71,000 267,000 276,500 | 765,500 366,800 411,300 836,500 Total assets Li abilities and Stockholders' Equity Accounts payable (185250*0.6) Common stock Retained earnings (79500+99000) 111,150 307,000 178,500 * cash budget Beginning Cash Balance Add: Cash Collection Total Cash Available Less: Cash Disbursement Inventory Purchase Selling and administrative expenses Total Cash Disbursement Excess/Deficiency Total liabilities and stockholders' equity 596,650 150,200 | 43,000 193,200 | 99,800 189,000 43,000 232,000 134,800 190,650 43,000 233,650 177,650 529,850 129,000 658,850 177,650