Beech Corporation is a merchandising company that is preparing a master budget f

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:

[The following information applies to the questions displayed below.]

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 estmates: 1. Estimated sales for July, August, September, and October will be 2. All sales are on credit and all credit sales are collected. Each month's $380,000, $400,000, $390,000, and $410,000, respectively 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 70% 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 S7,000 of this total amount is depreciation expense and the remaining $45,000 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 ssue 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 Schedule of Expected Cash Collections Month July August Se From accounts receivable From July sales rom August sales From September sales Total cash collections 2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30. Merchandise Purchases Budget Jul Se r Total Budgeted cost of goods sold Total needs

Explanation / Answer

Schedule of Expected Cash Collections July August September Quarter From Accounts receivable 140,000 140,000 From July sales (380,000*35%;65%) 133000 247000 380000 From August sales (400,000*35%;65%) 140000 260000 400000 From September sales (390,000*35%) 136500 136500 Total cash collections 273,000 387000 396500 1,056,500 Accounts receivable 390,000*65%= 253500 2-a) Merchandise Purchase Budget July August September Total october Budgeted cost of goods sold (70% of sales) 266000 280000 273000 819000 287000 Add:Desired ending merchandise inventory 70000 68250 71750 71750 total needs 336000 348250 344750 890750 less: Beginning merchandise inventory 66,500 70000 68250 66,500 Required purchased 269,500 278250 276500 824,250 2-b) Schedule of Cash Disbursement for purchases July August September Total From Accounts payable 88,000 88,000 From July purchases (147,700*40%;60%) 107800 161700 269500 From august purchases (173600*40%;60%) 111300 166950 278250 From September purchases (170800*40%) 110600 110600 total cash disbursements 195,800 273000 277550 746,350 Accounts payable 276500*60%= 165900 3) Income Statement Sales 1170000 cost of goods sold (1170000*70%) 819000 Gross profit 351000 Selling and administrative expense (52000*3) 156000 net operating income 195000 interest expense 0 net income (loss) 195000 4) Balance sheet Assets Cash (75000+1056500-746350 -45000*3) 250,150 Account receivable 253500 inventory 71750 Plant and Equipment,net (227000-7000*3) 206000 Total Assets 781400 Liabilities and Stockholders Equity Accounts payable 165900 Capital Stock 311,000 Retained earnings (109500+195000) 304500 Total liabilities & Stockholder's Equity 781400

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.