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Schedules of Expected Cash Collections and Disbursements; Income Statement; Balance Sheet [LO8-2, LO8-4, LO8-9, LO8-10]

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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	$	81,000
Accounts receivable		132,000
Inventory		56,250
Plant and equipment, net of depreciation		214,000
Total assets	$	483,250
Liabilities and Stockholders’ Equity
Accounts payable	$	75,000
Common stock		346,000
Retained earnings		62,250
Total liabilities and stockholders’ equity	$	483,250

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 $250,000, $270,000, $260,000, and $280,000, 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 75% 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 $5,000 of this total amount is depreciation expense and the remaining $41,000 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.

Answer 1

Solution 1:

Schedule of expected cash collection - Beech Corporation
Particulars	July	August	September	Total
Accounts Receivables from June	$132,000.00			$132,000.00
Cash received for July Sale	$87,500.00	$162,500.00		$250,000.00
Cash received for August Sale		$94,500.00	$175,500.00	$270,000.00
Cash received for September Sale			$91,000.00	$91,000.00
Budgeted Cash Collection	$219,500.00	$257,000.00	$266,500.00	$743,000.00

Solution 2a:

Material Purchase Budget - Beech Corporation
Particulars	July	August	September	Total
Budgeted Cost of goods sold	$187,500.00	$202,500.00	$195,000.00	$585,000.00
Add: Desired ending merchandise inventory	$60,750.00	$58,500.00	$63,000.00	$63,000.00
Total Needs	$248,250.00	$261,000.00	$258,000.00	$648,000.00
Less: Opening Inventory	$56,250.00	$60,750.00	$58,500.00	$56,250.00
Required purchases	$192,000.00	$200,250.00	$199,500.00	$591,750.00

Solution 2b:

Schedule of expected cash disbursement for merchandise purchases - Beech Corporation
Particulars	July	August	September	Total
Payables from June	$75,000.00			$75,000.00
July Purchases	$76,800.00	$115,200.00		$192,000.00
August Purchases		$80,100.00	$120,150.00	$200,250.00
September Purchases			$79,800.00	$79,800.00
Total payments in month	$151,800.00	$195,300.00	$199,950.00	$547,050.00

Solution 3:

Income Statement - Beech Corporation
For Quarter Ended - September 30
Particulars	Amount
Sales	$780,000.00
Cost of Sales	$585,000.00
Gross Profit	$195,000.00
Operating Expenses:
Selling and adminstrative expenses	$138,000.00
Net Income	$57,000.00

Solution 4:

Balance Sheet- Beech Corporation
30-Sep
Particulars	Amount
Assets:
Cash ($81,000 + $743,000 - $547,050 - $123,000)	$153,950.00
Accounts receivables ($260,000*65%)	$169,000.00
Inventory	$63,000.00
Plant and equipment net of depreciation ($214,000 - $15,000)	$199,000.00
Total Assets	$584,950.00
Liabilities and stockholder's Equity:
Accounts payable ($199,500*60%)	$119,700.00
Common Stock	$346,000.00
Retained Earnings ($62,250 + $57,000)	$119,250.00
Total liabilities and stockholders equity	$584,950.00