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 Common stock Retained earnings Total liabilities and stockholders' equity $ 92,000 130,000 48,600 216,000 $ 486,600 $ 77,000 329,000 80,600 $ 486,600 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

Answer 1

Beech Corporation:
Req 1:
Preparation of schedule of expected cash collections for July, August, and September
Schedules of Expected Cash Collections:
	Month
	July	August	September	Quarter
				$
Proceeds from Accounts receivable	130000	0	0	130000
From July Sales	94500	175500		270000
From August Sales	0	101500	188500	290000
From September Sales			98000	98000
Total Cash Collections	224500	277000	286500	788000
Req 2A:
Merchandise Purchases Budget:	July	August	September	Quarter
Cost of goods sold- 60% on sales	162000	174000	168000	504000
Ending Inventory- 30% of next month sales	87000	84000	90000	261000
Total Needs	249000	258000	258000	765000
Less: Opening Inventory	48600	87000	84000	219600
Required Purchases	200400	171000	174000	545400
Req 2B:
Schedule of Cash disbursements for Purchases:
	July	August	September	Quarter
Amount paid for Accounts payable as on June 30	77000	0	0	77000
From July Purchases	80160	120240		200400
From August Purchases		68400	102600	171000
From September Purchases			69600	69600
Total Cash disbursements	157160	188640	172200	518000
Req 3:
Beech Corporation:
Income Statement
For the quarter ended September 30
Sales for the Quarter	840000
Less: Purchases	545400
	294600
Less: Opening Inventory	48600
	246000
Add: Closing Inventory	90000
Gross Profit	336000
Less: Selling, Admininistrative expenses incl dep	150000
Net Profit before tax	186000
Req 4:
Beech Corporation:
Balance sheet
September 30
Assets:
Cash	227000	Opening Cash Balance		92000
Accounts Receivable	182000	Add: Cash collections during the
Inventory	90000	quarter		788000
Plant and equipment, net of depreciation	201000	Less: Cash disbursements
Total Assets	700000	for purchases		518000
		Less: Payments for Selling
Liabilities and Stockholder's Equity:		expenses		135000
		Closing Cash Balance		227000
Accounts Payable	104400
Common stock	329000
Retained Earnings	266600
Total Liabilities and Stockholder's Equity:	700000