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: Beech Corporation Balance Sheet 30 Cash Accounts receivable Inventory Plant and equipment, net of depreciation Total assets $ 85,000 141,000 83,250 226,000 s535,250 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings s 87,000 350,000 98,250 Total liabilities and stockholders equity s 535,250 Exercise 8-12 Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $370,000, $390,000, $380,000, and $400,000, 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. company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following 3. Each month's ending inventory must equal 30% of the cost of next month's sales. The cost of goods sold is 75% of sales. The 4. Monthly selling and administrative expenses are always $50,000. Each month $7,000 of this total amount is depreciation expense 5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company the purchase. All of the accounts payable at June 30 will be paid in July. and the remaining $43,000 relates to expenses that are paid in the month they are incurred. does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30

Answer 1

Schedule of expected cash collection
	July	Aug	sep	Quarter
Beginning accounts receivable	141000			141000
July sales	370000*.35= 129500	370000*.65= 240500		370000
Aug sales		390000*.35=136500	390000*.65=253500	390000
sep sales			380000*.35= 133000	133000
Total cash collections	270500	377000	386500	1034000

2a)

Schedule of merchandise pUrchase
	July	Aug	sep	Quarter
cost of goods sold	370000*75%=277500	390000*75%= 292500	380000*75%= 285000	855000
Desired ending inventory	87750    [292500*.30]	85500      [285000*.30]	90000    [400000*.75*.30]	263250
less:beginning inventory	(83250)	(87750)	(85500)	(256500)
Merchandise purchased	282000	290250	289500	861750

2b)

Schedule of cash disbursement for merchandise purchased
	July	Aug	sep	quarter
Cost of merchandise purchased	282000	290250	289500	861750
Beginning accounts payable	87000			87000
July purchase	282000*40%=112800	282000*60%= 169200		282000
Aug purchase		116100	174150	290250
Sep purchase			115800	115800
Total cash disbursement	199800	285300	289950	775050

3)

INCOME STATEMENT FOR THE QUARTER ENDED SEPTEMBER 30
Sales [370000+390000+380000]	1140000
less:cost of goods sold	(855000)
gross margin	285000
less:Selling and administrative expense (50000*3)	(150000)
Net income	135000