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

ID: 2653987 • Letter: B

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:

rev: 09_17_2014_QC_54310

value:
3.12 points

Required information

Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, 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 $50,000. Each month $5,000 of this total amount is depreciation expense and the remaining $45,000 relates to expenses that are paid in the month they are incurred.

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.

Prepare an income statement for the quarter ended September 30.

Prepare a balance sheet as of September 30.

rev: 09_17_2014_QC_54310

References

eBook & Resources

WorksheetLearning Objective: 08-02 Prepare a sales budget, including a schedule of expected cash collections.Learning Objective: 08-09 Prepare a budgeted income statement.

Difficulty: 1 EasyLearning Objective: 08-04 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials.Learning Objective: 08-10 Prepare a budgeted balance sheet.

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value:
3.16 points

Required information

Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, 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 60% 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.

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 an income statement for the quarter ended September 30.

Prepare a balance sheet as of September 30.

[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:

Explanation / Answer

Note:

Merchandise Purchase = Ending Inventory + COGS - Benginning Inventory

The First 4 questions calculations and solutions are as follows. (All values in $)

NOTE: Out of total 5 questions, 4 have been answered.

(1) CASH COLLECTIONS SCHEDULE July August Sept Oct Estimated Sales 2,70,000 2,90,000 2,80,000 3,00,000 Cash Collected: 35% in Same Month 94,500 1,01,500 98,000 1,05,000 Cash Collected: 65% in Next Month 1,75,500 1,88,500 1,82,000 Cash Collected from Sales 94,500 2,77,000 2,86,500 2,87,000 Plus: Accounts Receivable from June 1,30,000 Total Monthly Cash Collection 2,24,500 2,77,000 2,86,500 2,87,000 (2) MERCHANDIZE PURCHASE SCHEDULE July August Sept Oct Estimated Sales 2,70,000 2,90,000 2,80,000 3,00,000 COGS @60% 1,62,000 1,74,000 1,68,000 1,80,000 Ending Inventory@30% of Next Month COGS 52,200 50,400 54,000 Beginning Inventory (on June 30 Last FY) 48,600 52,200 50,400 54,000 Purchases 1,65,600 1,72,200 1,71,600 1,26,000 (3) MERCHANDIZE PAYMENT SCHEDULE July August Sept Oct Purchases 1,65,600 1,72,200 1,71,600 1,26,000 Cash Paid: 40% in Same Month 66,240 68,880 68,640 50,400 Cash Paid: 60% in Next Month 99,360 1,03,320 1,02,960 Cash Paid for Merchandize 2,31,840 3,40,440 3,43,560 2,79,360 Plus: Accounts Payable from June 77,000 Total Monthly Payment 3,08,840 3,40,440 3,43,560 2,79,360 (4) INCOME STATEMENT July August Sept TOTAL Estimated Sales 2,70,000 2,90,000 2,80,000 8,40,000 Less: COGS 1,62,000 1,74,000 1,68,000 5,04,000 Gross Profit 1,08,000 1,16,000 1,12,000 3,36,000 Less: Depreciation 5,000 5,000 5,000 15,000 Less: Selling & Other Expenses 45,000 45,000 45,000 1,35,000 Net Profit 58,000 66,000 62,000 1,86,000

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

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