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:

alue:
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Required information

Estimated sales for July, August, September, and October will be $250,000, $270,000, $260,000, and $280,000, respectively.

All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 45% in the month of sale and 55% 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 20% of the cost of next month’s sales. The cost of goods sold is 75% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% 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 $46,000. Each month $5,000 of this total amount is depreciation expense and the remaining $41,000 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.

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

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

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.

4.Prepare a balance sheet as of September 30.

Prepare an income statement for the quarter ended September 30.

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:

Explanation / Answer

1. Schedule of expected cash collections: Month July August Sept. Quarter From accounts receivable $132,000 $132,000 From July sales: 45% × 250,000 112500 $112,500 55% × 250,000 137500 $137,500 From August sales: 45% × 270,000 121500 $121,500 55% × 270,000 148500 $148,500 From September sales: 45% × 260,000                             117000 $117,000 Total cash collections $244,500 $259,000 $265,500 $769,000 2 Merchandise purchases budget: July August Sept. Total Budgeted cost of goods sold $187,500 $202,500 $195,000 $585,000 (75% of sales) Add desired ending merchandise inventory* $40,500 $39,000 42000 42000 Total needs 228,000 241,500 237,000 627,000 Less beginning merchandise inventory 56250 $40,500 $39,000 56250 Required purchases $171,750 $201,000 $198,000 $570,750 *At July 31: $202500 × 20%

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