[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 $ 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 assumptions and 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. Each month’s credit sales are collected 45% in the month of sale and 55% 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 20% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase 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 and the remaining $55,000 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 for the quarter ended September 30. 4. Prepare a balance sheet as of September 30.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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[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 $ 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 assumptions and estimates:

 

  1. Estimated sales for July, August, September, and October will be $210,000, $230,000, $220,000, and $240,000, respectively.

  2. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 45% in the month of sale and 55% 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 20% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% 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 $60,000. Each month $5,000 of this total amount is depreciation expense and the remaining $55,000 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.

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 for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

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