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 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.

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.

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:

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

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. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30.

3. Prepare an income statement for the quarter ended September 30.

4. Prepare a balance sheet as of September 30. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1Req 2AReq 2BReq 3Req 4 Prepare a balance sheet as of September 30.

quarter ended September 30.

quarter ended September 30.

Schedule of Expected Cash Collections Month July August September Quarter From accounts receivableselected answer correct $139,000selected answer correct $139,000 From July sales 136,500selected answer correct 253,500selected answer correct 390,000 From August sales 143,500selected answer correct 266,500selected answer correct 410,000 From September sales 140,000selected answer correct 140,000 Total cash collections $275,500 $397,000 $406,500 $1,079,000

Merchandise Purchases Budget July August September Quarter Budgeted cost of goods soldselected answer correct $234,000selected answer correct $246,000selected answer correct $240,000selected answer correct $720,000selected answer correct Add: Desired ending merchandise inventoryselected answer correct 73,800selected answer correct 72,000selected answer correct 75,600selected answer correct 221,400selected answer incorrect Total needs 307,800selected answer correct 318,000selected answer correct 315,600selected answer correct 941,400selected answer incorrect Less: Beginning merchandise inventoryselected answer correct 70,200selected answer correct 73,800selected answer correct 72,000selected answer correct 216,000selected answer incorrect Required purchases $237,600selected answer correct $244,200selected answer correct $243,600selected answer correct $725,400selected answer correct

Schedule of Cash Disbursements for Purchases July August September Quarter From accounts payableselected answer correct $89,000selected answer correct $89,000 From July purchases 95,040selected answer correct 142,560selected answer correct 237,600 From August purchases 97,680selected answer correct 146,520selected answer correct 244,200 From September purchases 97,440selected answer correct 97,440 Total cash disbursements $184,040 $240,240 $243,960 $668,240

Beech Corporation Income Statement For the Quarter Ended September 30 Salesselected answer correct $1,200,000selected answer correct Cost of goods soldselected answer correct 720,000selected answer correct Gross marginselected answer correct 480,000 Selling and administrative expensesselected answer correct 162,000selected answer correct Net operating incomeselected answer correct 318,000 Net incomeselected answer correct $318,000

Req 1

Prepare a balance sheet as of September 30.

Beech Corporation Balance Sheet September 30 Assets Cashselected answer correct $344,760selected answer incorrect Accounts receivableselected answer correct 273,000selected answer incorrect Inventoryselected answer correct 72,000selected answer incorrect Plant and equipment, netselected answer correct 207,000selected answer correct Total assets $896,760 Liabilities and Stockholders' Equity Accounts payableselected answer correct $435,240selected answer incorrect Common stockselected answer correct 333,000selected answer correct Retained earningsselected answer correct 429,200selected answer correct Total liabilities and stockholders' equity $1,197,440

Req 3

Answer 1

	July	August	September	October	Total quarter
Sales	390000	410000	400000	420000	1200000
Sale collected in month (sales *35%)	136500	143500	140000	147000
Sale collected after one month (sales *65%)	253500	266500	260000	273000
Balance of account receivable at end of quarter (payment of 260000 to be received in future.)			260000
Cost of goods sold (sales *60%)	234000	246000	240000	252000	720000
Ending inventory of month (NeXT’s month cost of goods sold *30%)	73800	72000	75600
Beginning inventory for July given in question = 70200
Required purchases	237600	244200	243600
Payment made in month of purchase (Required purchases*40%)	95040	97680	97440
Payment made after one month of purchase (Required purchases*60%)	142560	146520	146160
Balance of account payable at end of quarter (payment of 146160 paid in future.)

Schedule of Expected Cash Collections
	Month
	July	August	September	Quarter
From accounts receivable	$139,000			$139,000
From July sales	136,500	253,500		$390,000
From August sales		143,500	266,500	$410,000
From September sales			140,000	$140,000
Total cash collections	$275,500	$397,000	$406,500	$1,079,000
Merchandise Purchases Budget
	July	August	September	Quarter
Budgeted cost of goods sold	$234,000	$246,000	$240,000	$720,000
Add: Desired ending merchandise inventory	73,800	72,000	75,600	$75,600
Total needs	307,800	318,000	315,600	795,600
Less: Beginning merchandise inventory	70,200	73,800	72,000	$70,200
Required purchases	237,600	244,200	243,600	725,400
Balance of inventory at end of quarter 75600
Schedule of Cash Disbursements for Purchases
	July	August	September	Quarter
From accounts payable	$89,000			$89,000
From July purchases	95,040	142,560		$237,600
From August purchases		97,680	146,520	$244,200
From September purchases			97,440	$97,440
Total cash disbursements	$184,040	$240,240	$243,960	$668,240

Beech Corporation
Income Statement
For the Quarter Ended September 30
Sales	1200000
Cost of goods sold	720000
Gross margin	480,000
Selling and administrative expenses (54000*3 month) with depreciation	162,000
Net operating income	318,000
Net income	$318,000
Beech Corporation
Balance Sheet
Sep-30
Assets
Cash	$      365,760
Accounts receivable	$      260,000
Inventory	$        75,600
Plant and equipment (7000*3 =21000) (228000-21000 depreciation)	$            207,000
Total assets	$            908,360
Liabilities and Stockholders' Equity
Accounts payable	$      146,160
Common stock	$            333,000
Retained earnings (111200+318000)	$            429,200
Total liabilities and stockholders' equity	$            908,360
Beech Corporation
Cash budget
For the Quarter Ended September 30
Beginning balance of cash	$              96,000
Cash received from sales	$1,079,000
Total cash available for made [payment	$1,175,000
Less: payment made to account payable	($668,240)
Less: payment made to sales and administrative expense paid (exclude depreciation ) (47000*3)	$         (141,000)
Ending balance of cash	365,760