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 94,000 145,000 59,400 222,000 Accounts receivable Inventory Plant and equipment, net of depreciation Total assets 520,400 Liabilities and Stockholders' Equity Accounts payable 83,000 331,000 106,400 Common stock Retained earnings 520,400 Total liabilities and stockholders' equity Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $330,000, $350,000, $340,000, and $360,000, respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 45% in the month of sale and 55% 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 20% of the cost of next month's sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% 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 $42,000. Each month $6,000 of this total amount is depreciation expense and the remaining $36,000 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					145,000			145,000
From July sales		(330,000*45%;55%)			148500	181500		330000
From August sales		(350,000*45%;55%)				157500	192500	350000
From September sales		(340,000*45%)					153000	153000
Total cash collections					293,500	339000	345500	978,000
			Accounts receivable 340,000*55%=				187000
2-a)		Merchandise Purchase Budget
					July	August	September	Total
Budgeted cost of goods sold			(60% of sales)		198000	210000	204000	612000
Add:Desired ending merchandise inventory					42000	40800	43200	43200
total needs					240000	250800	247200	655200
less: Beginning merchandise inventory					59,400	42000	40800	59,400
Required purchased					180,600	208800	206400	595,800
2-b)		Schedule of Cash Disbursement for purchases
					July	August	September	Total
From Accounts payable					83,000			83,000
From July purchases					54180	126420		180600
From august purchases						62640	146160	208800
From September purchases							61920	61920
total cash disbursements					137,180	189060	208080	534,320
		Accounts payable		206400*70%=		144480
3)		Income Statement
	Sales						1020000
	cost of goods sold						612000
	Gross profit						408000
	Selling and administrative expense				(42000*3)		126000
	net operating income						282000
	interest expense						0
	net income (loss)						282000
4)		Balance sheet
	Assets
	Cash						429,680
	Account receivable						187000
	inventory						43200
	Plant and Equipment,net						204000
	Total Assets						863880
	Liabilities and Stockholders Equity
	Accounts payable						144480
	Capital Stock						331,000
	Retained earnings						388400
	Total liabilities & Stockholder's Equity						863880