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Colerain Corporation is a merchandising company that is preparing a budget for the third quarter of...

Colerain Corporation is a merchandising company that is preparing a budget for the third quarter of the calendar year. The company’s balance sheet as of June 30 is shown below:

COLERAIN CORPORATION
Balance Sheet
June 30
Assets
  Cash $   95,000
  Accounts receivable 141,000
  Inventory 67,000
  Plant and equipment, net of depreciation 350,000
  Total assets $ 653,000
Liabilities and Shareholders’ Equity
  Accounts payable $   76,000
  Common shares 450,000
  Retained earnings 127,000
  Total liabilities and shareholders’ equity $ 653,000


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

  1. Estimated sales for July, August, September, and October will be $300,000, $320,000, $310,000, and $330,000, respectively.
  2. All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 25% in the month of sale and 75% 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 40% of the cost of next month’s sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% 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 $80,000. Each month, $9,000 of this total amount is depreciation expense and the remaining $71,000 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 shares or repurchase its own shares during the quarter ended September 30.


Required:
1.
Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

2b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30th.

  

3. Prepare an income statement for the quarter ended September 30. (Do not leave any empty spaces; input a 0 wherever it is required.)

4. Prepare a balance sheet as of September 30.

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