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 $ 94,000 Accounts receivable 145,000 Inventory 59,400 Plant and equipment, net of depreciation 222,000 Total assets $ 520,400 Liabilities and Stockholders’ Equity Accounts payable $ 83,000 Common stock 331,000 Retained earnings 106,400 Total liabilities and stockholders’ equity $ 520,400 Beech’s managers have made the following additional assumptions and estimates: Estimated sales for July, August, September, and October will be $330,000, $350,000, $340,000, and $360,000, respectively. 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. 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. Monthly selling and administrative expenses are always $42,000. Each month $6,000 of this total amount is depreciation expense and the remaining $36,000 relates to expenses that are paid in the month they are incurred. 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. 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. 3. Prepare an income statement that computes net operating income for the quarter ended September 30. 4. Prepare a balance sheet as of September 30. REQUIRED 1a Prepare a schedule of expected cash collections for July, August, and September. Schedule of Expected Cash Collections Month July August September Quarter From July sales From August sales From September sales Total cash collections REQUIRED 2a Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30. Merchandise Purchases Budget July August September Quarter Total needs Required purchases REQUIRED 2b repare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Schedule of Cash Disbursements for Purchases July August September Quarter For July purchases For August purchases For September purchases Total cash disbursements
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Beech Corporation is a merchandising company that is preparing a
| Beech Corporation | ||
| Balance Sheet | ||
| June 30 | ||
| Assets | ||
| Cash | $ | 94,000 |
| Accounts receivable | 145,000 | |
| Inventory | 59,400 | |
| Plant and equipment, net of depreciation | 222,000 | |
| Total assets | $ | 520,400 |
| Liabilities and |
||
| Accounts payable | $ | 83,000 |
| Common stock | 331,000 | |
| Retained earnings | 106,400 | |
| Total liabilities and stockholders’ equity | $ | 520,400 |
Beech’s managers have made the following additional assumptions and estimates:
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Estimated sales for July, August, September, and October will be $330,000, $350,000, $340,000, and $360,000, respectively.
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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.
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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.
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Monthly selling and administrative expenses are always $42,000. Each month $6,000 of this total amount is depreciation expense and the remaining $36,000 relates to expenses that are paid in the month they are incurred.
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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.
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.
3. Prepare an income statement that computes net operating income for the quarter ended September 30.
4. Prepare a balance sheet as of September 30.
REQUIRED 1a
Prepare a schedule of expected cash collections for July, August, and September.
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REQUIRED 2a
Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
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REQUIRED 2b
repare a schedule of expected cash disbursements for merchandise purchases for July, August, and September.
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