Required information

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

1. Estimated sales for July, August, September, and October will be $280,000, $300,000, $290,000, and $310,000, 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 25% 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 $52,000. Each month $5,000 of this total amount is depreciation expense and the remaining $47,000 relates to expenses that are paid in the month they are incurred.

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 that computes net operating income for the quarter ended September 30.

4. Prepare a balance sheet as of September 30.

Advocates of a market orientation system argue that exclusive reliance on the visible hands of government will never bring spending under control. The missing component has been the invisible hand of the market pricing mechanism. Patients spending their own money have an incentive to control spending. Do you agree or disagree? Please support your argument.

3 Foreign country fiscal policy

During the World War I (1914-1918), the UK increases the government spending substantially to finance its military spending. However, the US government spending at that time did not increase much because of its non-intervention policy. Assume there were only two countries in the world, the US was a small open economy and UK was a large country, use IS??LM? model to graphically analyze how the increase of UK government spending change the real exchange rate (pounds/dollar) and the real output in the US, explain in detail.

1. According to the Ricardian equivalence theorem, an increase in government spending (G) would:

Increase aggregate demand as consumer spending would not change

Decrease aggregate demand as consumer spending would decrease more than the increase in G

Not change aggregate demand as consumer spending would decrease by the opposite amount as the increase in G

Not change aggregate demand as household savings would decrease

2.  From a functional finance perspective, when the economy is in an inflationary gap the government should:

do nothing

run a deficit

run a surplus

run a balanced budget

Presented below is information related to Vaughn Enterprises.

(a)

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost; the gain or loss due to market fluctuations is to be shown separately (using a valuation account). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Most economic policies are a two-edge sword. The overuse of a policy may cause significant side effects. The side effects of an expansionary fiscal policy include:

• A.

  government budget deficit.

• B.

  potential inflation.

• C.

  that the government may have too much influence on the market economy, and its efficiency is always of question.

• D.

  all of the above.

One year ago, the federal discount rate (a key interest rate) was 2.5%, and the current federal discount rate is 0.5%. Such adjustment aims to:

• A. encourage lending.

• B. decrease the monetary base.

• C. increase the cost for firms to borrow from the Fed.

• D. balance federal budget.

Shannon made $50,000 last year and received a $10,000 raise this year for her excellence at work. With the additional income, she spent $6,000 more this year. What is the marginal propensity to consume (MPC) for Shannon?

• A. 50%

• B. 60%

• C. 40%

• D. 70%

Suppose banks keep cash reserves as much as 5% of their deposits (currency drain ratio), and the current required reserve ratio is 10%. What is the money multiplier?

multiplier = (1 + CDR) / (RRR + CDR)

• A. 4

• B. 6

• C. 3

• D. 7

Suppose the U.S. real GDP in 2008 is $14 trillion, price level is 2, and velocity of circulation is 4. What is the quantity of money in the economy?

• A. 7 trillion

• B. 4 triliion

• C. 28 trillion

• D. 14 trillion

The Short-Run Phillips Curve shows:

• A. that monetary policy has an inverse effect on the unemployment rate and the inflation rate.

• B. monetary policy is effective in moving the real economy in the short run since it can affect the unemployment rate.

• C. There is a negative relationship between the inflation rate and the unemployment rate in the short run.

• D. all of the above.

The government expenditure multiplier refers to:

• A. that government spending leads to less consumer spending.

• B. that each additional dollar spent by the government will lead to a less than one dollar increase in GDP.

• C. that government spending has little impact on national economy.

• D. that government spending has a magnified effect on national economy.

To serve as a commodity money, an object must satisfy which of the following requirements?

• A. It has to be a commodity or token, which can be divided into small parts.

• B. It has to be generally accepted by the market participants to trade for goods and services.

• C. It has to be used as a method of settling a debt or payment.

• D. all of the above.

To serve as a commodity money, an object must satisfy which of the following requirements?

• A. It has to be a commodity or token, which can be divided up into small parts.

• B. It has to be generally accepted by the market participants to trade for anything and everything.

• C. It has to be used as a method of settling a debt or payment.

• D. All of the above.

Tom bought 6 oranges for 3 dollars. Money serves the function of:

• A. store of value.

• B. unit of account.

• C. medium of exchange.

• D. standard of deferred payment.

What is (are) the main objective(s) of fiscal policy:

• A. higher economic growth.

• B. full employment.

• C. low inflation.

• D. all of the above.

· Ophelia purchased 1 bunch of grapes, 2 earrings, 4 rings, 2 jars of olives, and 3 plums, spending $135 total.

· Cyrus purchased 1 ring, 2 bunches of grapes, 2 earrings, 4 jars of olives, and 5 plums, spending $151 total.

· Tressa purchased 5 earrings, 3 bunches of grapes, 2 jars of olives, 4 plums, and 2 rings, spending $163 total.

· Olberic purchased 1 jar of olives, 1 earring, 2 plums, 6 rings, and 4 bunches of grapes, spending $146 total.

· Primrose purchased 1 plum, 4 rings, 5 bunches of grapes, 3 earrings, and 3 jars of olives, spending $187 total.

Find the prices of each item purchased.

A survey by American Express Spending reported that the average amount spent on a wedding gift for a close family member is $166. A random sample of 45 people who purchased wedding gifts for a close family member spent an average of $160.50. Assume that the population standard deviation is $38. Use a 95% confidence interval to test the validity of this report and choose the one statement that is correct.