Question

[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 $ 74,000 Accounts receivable 143,000 Inventory 73,500 Plant and equipment, net of depreciation 224,000 Total assets $ 514,500 Liabilities and Stockholders’ Equity Accounts payable $ 85,000 Common stock 310,000 Retained earnings 119,500 Total liabilities and stockholders’ equity $ 514,500 2.value: 10.00 pointsRequired information Beech’s managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $350,000, $370,000, $360,000, and $380,000, 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 70% 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 $46,000. Each month $7,000 of this total amount is depreciation expense and the remaining $39,000 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

Tail Balance of Beech Corporation for the period ending - June 30
Ledger	Debit	Credit
Cash	$74,000
Account Receivable	$1,43,000
Inventory	$73,500
Plant and Equipment (Net of Dep)	$2,24,000
Accounts Payable		$85,000
Common Stock		$3,10,000
Retained Earnings		$1,19,500
Total	$5,14,500	$5,14,500
Schedule of expected cash collections for July, August, and September
	July	August	September	Total
Sales for the Month	$3,50,000	$3,70,000	$3,60,000	$10,80,000
Computation of total cash collections for the quarter ended September
	July	August	September	Total
Sales Collection- Current Month (35%) (A)	$1,22,500	$1,29,500	$1,26,000	$3,78,000
Sales Collection- Previous Month (65%) (B)	$1,43,000	$2,27,500	$2,40,500	$6,11,000
Total Cash Collections from sales (A+B)	$2,65,500	$3,57,000	$3,66,500	$9,89,000
Merchandise purchases budget for July, August, and September.
Cost Of Goods Sold	July	August	September	Total
Cost Of Goods Sold (70% of Sales) for the Month (A)	$2,45,000	$2,59,000	$2,52,000	$7,56,000
Inventory Requirement (30% of next Months COGS) (B)	$77,700	$75,600	$79,800	$2,33,100
Total Inventory Purchase for the month (A+B)	$3,22,700	$3,34,600	$3,31,800	$9,89,100
Computation of total merchandise purchases for the quarter ended September 30
schedule of expected cash disbursements for merchandise purchases for July, August, and September
	July	August	September	Total
Inventory Payment - current Month (40%) (A)	$1,29,080	$1,33,840	$1,32,720	$3,95,640
Inventory Payment - Previous Month (60%) (B)	$85,000	$1,93,620	$2,00,760	$4,79,380
Total Cash payment for COGS (A+B)	$2,14,080	$3,27,460	$3,33,480	$8,75,020
Selling and administrative expenses (Including Depreciation) (A)	$46,000	$46,000	$46,000	$1,38,000
Depreciation expense (B)	$7,000	$7,000	$7,000	$21,000
Expenses payment - Current Month 100% (A-B)	$39,000	$39,000	$39,000	$1,17,000
Total cash disbursements for merchandise purchases for the quarter ended September 30
	July	August	September	Total
Opening Cash Balance	$74,000	$86,420	$76,960
Add: Collection from Sales and Debtors	$2,65,500	$3,57,000	$3,66,500	$9,89,000
Less : Payment for COGS and Creditors	$2,14,080	$3,27,460	$3,33,480	$8,75,020
Less : Payment for Selling and Admin Expenses	$39,000	$39,000	$39,000	$1,17,000
Closing Cash Balance	$86,420	$76,960	$70,980	-$3,020
Income statement for the quarter ended September 30
Total Sales for the Quarter	$10,80,000
Less :Total COGS for the Quarter	$7,56,000
Less :Total Selling and Admin cost for the Quarter	$1,38,000
Net Income for the Quarter	$1,86,000