Question

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	$	96,000
Accounts receivable		139,000
Inventory		70,200
Plant and equipment, net of depreciation		228,000
Total assets	$	533,200
Liabilities and Stockholders’ Equity
Accounts payable	$	89,000
Common stock		333,000
Retained earnings		111,200
Total liabilities and stockholders’ equity	$	533,200

Beech’s managers have made the following additional assumptions and estimates:

Estimated sales for July, August, September, and October will be $390,000, $410,000, $400,000, and $420,000, 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 $54,000. Each month $7,000 of this total amount is depreciation expense and the remaining $47,000 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:

Prepare a balance sheet as of September 30.

	Beech Corporation Balance Sheet September 30 Assets Cash Accounts receivable Inventory Plant and equipment, net Total assets $0 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $0

Answer 1

Balance Sheet of Beech Corporation As on september 30

	Amount
Assets
Cash (Working Note-5)	$454,480
Accounts receivable($4,20,000*55%)	$220,000
Inventory[(Sales*60%)*20%] [($4,00,000*60%)*20%]	$50,400
Plant and equipment, net of Depreciation ($228000-$7000*3)	$207,000
Total assets	$931,880
Liabilities and Stockholders' Equity
Accounts payable (242,400*70%)	$169680
Common stock	$333,000
Retained earnings(Working Note-4) [(102000+110000+106000)+111200]	$429,200
Total liabilities and stockholders' equity	$931,880

Working Notes 1.Schedule of Expected cash collection Purticulers July August September Total From Account receivable 1,39,000 0 0 1,39,000 From july sales 1,75,500 2,14,500 0 3,90,000 From August sales 0 1,84,500 2,25,500 4,10,000 From September sales 0 0 1,80,000 1,80,000 Total 3,14,500 3,99,000 4,05,500 11,19,000 2.Calculation of required purchase. Purticulrs July Aug Sep A.Sales $390,000 $410,000 $400,000 B.Cost Of Goods Sold-COGS(60% of Sales) $234,000 $246,000 $240,000 C.Add:Desired Inventory(20% of next month COGS) $49,200 $48,000 $50,400 D.Less:Begining Inventory $70,200 $49,200 $48,000 E:Required Purchase(B-C-D) $213,000 $244,800 $242,400 3.Paymant to supplier (Figures in $)

Purticulers	July	Aug	Sep	Total
From Account Payable of june	89000	0	0	89000
For July Purchase	63900	73440	0	137340
For August Purchase	0	149100	171360	320460
For September Purchase	0	0	72720	72720
Total	152900	225540	244080	619520

4.Retained Earnings

Purticulers	July	August	Sep
A.Sales	390000	410000	400000
B.Cost Of Goods Sold(60%)	234000	246000	240000
C.Expenses	54000	54000	54000
D:Retained Earnings(A-B-C-D)	102000	110000	106000

4.Cash Balance

Purticulers	Amount
Opaning Balance	$96,000
Add:Expected cash collection	$11,19,000
Total	$12,15,000
Less:Payment to supplier	$6,19,520
Less:Payment for Expenses(47000*3)	$141,000
Closing cash balance	$454,480