Question

Under 2B. Cash Budget how do you calculate August (121,500) and September (168,000)?

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 $ 84,000 144,000 63,750 223,000 $ 514,750 $ 84,000 349,000 81,750 $ 514,750 Beech's managers have made the following additional assumptions and estimates: 1 Estimated sales for July, August, September, and October will be $340,000, $360,000, $350,000, and $370,000, 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 75% 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 $44,000. Each month $6,000 of this total amount is depreciation expense and the remaining $38,000 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.

Answer 1

July August September October 340,000 360,000 350,000 370,000 sales Beech Corporation 1.Schedule of Expected Cash Collections Month August September July 144,000 119,000 221,000 126,000 From accounts receivable From July sales From August sales From September sales Total cash collections collection =35% * current month sales + 65% of last month sales Quarter 144,000 340,000 360,000 122,500 966,500 234,000 122,500 356,500 263,000 347,000 Beech Corporation 2a. Merchandise Purchases Budget | July Budgeted cost of goods sold (75% of sales) 255,000 Add: Desired ending merchandise inventory (25% of next month COGS) | 67,500 Total needs 322,500 Less: Beginning merchandise inventory 63,750 Required purchases 258,750 August September 270,000 262,500 65,625 152,625 335,625 415,125 67,500 65,625 268,125 349,500 Total 787,500 152,625 940,125 63,750 876,375 August September Beech Corporation 2b.Schedule of Cash Disbursements for Purchases July From accounts payable 84,000 From July purchases 103,500 From August purchases From September purchases Total cash disbursements 187,500 Disbursement = 40% * current month Purchase + 60% of last month Purchase 155,250 107,250 160,875 139,800 300,675 Total 84,000 258,750 268, 125 139,800 750,675 262,500

Beech Corporation 3.Income Statement For the Quarter Ended September 30 Sales Cost of goods sold Gross margin Selling and administrative expenses (44000*3) Net operating income Interest expense Net income 1,050,000 787,500 262,500 132,000 130,500 130,500 July 84,000 263,000 347,000 August September Quarter 121,500 168,000 84,000 347,000 356,500 966,500 468,500 524,500 1,050,500 * 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 187,500 38,000 225,500 121,500 262,500 38,000 300,500 168,000 300,675 38,000 338,675 185,825 750,675 114,000 864,675 185,825

Beech Corporation 4.Balance Sheet September 30. Assets Cash* Accounts receivable (350000*60%) Inventory Plant and equipment, net =223000-6000*3 185,825 227,500 152,625 205,000 770,950 Total assets Liabilities and Stockholders' Equity Accounts payable (349500*0.6) Common stock Retained earnings (81750+130500) 209,700 349,000 212,250 Total liabilities and stockholders'equity 770,950