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Beech Corporation is a merchandising company that is preparing a master budget for the third quarter...

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: 1.Estimated sales for July, August, September, and October will be $330,000, $350,000, $340,000, and $360,000, 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 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. 4.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. 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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Expert Solution

Schedule of Expected Cash Collections
July August September Quarter
From Accounts receivable 145,000 145,000
From July sales (330,000*35%;65%) 115500 214500 330000
From August sales (350,000*35%;65%) 122500 227500 350000
From September sales (340,000*35%) 119000 119000
Total cash collections 260,500 337000 346500 944,000
Accounts receivable 340,000*65%= 221000
2-a) Merchandise Purchase Budget
July August September Total october
Budgeted cost of goods sold (60% of sales) 198000 210000 204000 612000 216000
Add:Desired ending merchandise inventory 63000 61200 64800 64800
total needs 261000 271200 268800 676800
less: Beginning merchandise inventory 59,400 63000 61200 59,400
Required purchased 201,600 208200 207600 617,400
2-b) Schedule of Cash Disbursement for purchases
July August September Total
From Accounts payable 83,000 83,000
From July purchases (201,600*40%;60%) 80640 120960 201600
From august purchases (208200*40%;60%) 83280 124920 208200
From September purchases (207600*40%) 83040 83040
total cash disbursements 163,640 204240 207960 575,840
Accounts payable 207600*69% 124560
3) Income Statement
Sales 1020000
cost of goods sold (1020000*60%) 612000
Gross profit 408000
Selling and administrative expense (42000*3) 126000
net operating income 282000
interest expense 0
net income (loss) 282000
4) Balance sheet
Assets
Cash (94000+944000-575840-36000*3) 354,160
Account receivable 221000
inventory 64800
Plant and Equipment,net (222,000-6000*3) 204000
Total Assets 843960
Liabilities and Stockholders Equity
Accounts payable 124560
Capital Stock 331,000
Retained earnings 388400
Total liabilities & Stockholder's Equity 843960

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