Beech Corporation is a merchandising company that is preparing amaster budget for the third quarter of the calendar year. Thecompany’s balance sheet as of June 30th is shown below:
| Beech Corporation |
| Balance Sheet |
| June 30 |
| Assets | | |
| Cash | $ | 90,000 |
| Accounts receivable | | 136,000 |
| Inventory | | 62,000 |
| Plant and equipment, net of depreciation | | 210,000 |
| Total assets | $ | 498,000 |
| Liabilities and Stockholders’Equity |
| Accounts payable | $ | 71,100 |
| Common stock | | 327,000 |
| Retained earnings | | 99,900 |
| Total liabilities and stockholders’ equity | $ | 498,000 |
|
Beech’s managers have made the following additional assumptionsand estimates:
Estimated sales for July, August, September, and October will be$210,000, $230,000, $220,000, and $240,000, respectively.
All sales are on credit and all credit sales are collected. Eachmonth’s credit sales are collected 45% in the month of sale and 55%in the month following the sale. All of the accounts receivable atJune 30 will be collected in July.
Each month’s ending inventory must equal 20% of the cost of nextmonth’s sales. The cost of goods sold is 60% of sales. The companypays for 30% of its merchandise purchases in the month of thepurchase and the remaining 70% in the month following the purchase.All of the accounts payable at June 30 will be paid in July.
Monthly selling and administrative expenses are always $60,000.Each month $5,000 of this total amount is depreciation expense andthe remaining $55,000 relates to expenses that are paid in themonth they are incurred.
The company does not plan to borrow money or pay or declaredividends during the quarter ended September 30. The company doesnot plan to issue any common stock or repurchase its own stockduring 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 thequarter ended September 30.
2-a. Prepare a merchandise purchases budget for July, August,and September. Also compute total merchandise purchases for thequarter ended September 30.
2-b. Prepare a schedule of expected cash disbursements formerchandise purchases for July, August, and September. Also computetotal cash disbursements for merchandise purchases for the quarterended September 30.
3. Prepare an income statement for the quarter ended September30.
4. Prepare a balance sheet as of September 30.
