Question

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 Cash Beech Corporation Balance Sheet June 30 Assets $ 90.000 Accounts receivable 136.000 Inventory 62,000 Plant and equipment, net of 210,000 depreciation Total assets $498,000 Liabilities and Stockholders' Equity Accounts payable $ 71,100 Common stock 327,000 Retained earnings 99,900 Total Ilabilities and $498,000 stockholders' equity Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July August September and October will be $210.000. $230,000, $220,000, and $240,000, 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 recevable 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 $60,000. Each month $5.000 of this total amount is depreciation expense and the remaining $55,000 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. 2-5. 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 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 2B Reg 3 Reg 4 Prepare a schedule of expected cash collections for July, August, and September.

Answer 1

		Schedule of Expected Cash Collections
					July	August	September	Quarter
From Accounts receivable					136,000			136,000
From July sales		(210,000*35%;65%)			73500	136500		210000
From August sales		(230,000*35%;65%)				80500	149500	230000
From September sales		(220,000*35%)					77000	77000
Total cash collections					209,500	217000	226500	653,000
			Accounts receivable 220,000*65%=				143000
2-a)		Merchandise Purchase Budget
					July	August	September	Total
Budgeted cost of goods sold			(60% of sales)		126000	138000	132000	396000
Add:Desired ending merchandise inventory					41400	39600	43200	43200
total needs					167400	177600	175200	439200
less: Beginning merchandise inventory					62,000	41400	39600	62,000
Required purchased					105,400	136200	135600	377,200
2-b)		Schedule of Cash Disbursement for purchases
					July	August	September	Total
From Accounts payable					71,100			71,100
From July purchases					42160	63240		105400
From august purchases						54480	81720	136200
From September purchases							54240	54240
total cash disbursements					113,260	117720	135960	366,940
		Accounts payable		135600*60%=		81360
3)		Income Statement
	Sales						660000
	cost of goods sold						396000
	Gross profit						264000
	Selling and administrative expense				(60000*3)		180000
	net operating income						84000
	interest expense						0
	net income (loss)						84000
4)		Balance sheet
	Assets
	Cash						211,060
	Account receivable						143000
	inventory						43200
	Plant and Equipment,net						195000
	Total Assets						592260
	Liabilities and Stockholders Equity
	Accounts payable						81360
	Capital Stock						327,000
	Retained earnings						183900
	Total liabilities & Stockholder's Equity						592260