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:

rev: 09_17_2014_QC_54310

Estimated sales for July, August, September, and October will be $310,000, $330,000, $320,000, and $340,000, 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 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.

Monthly selling and administrative expenses are always $58,000. Each month $6,000 of this total amount is depreciation expense and the remaining $52,000 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.

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

            Schedule of Expected cash Collections July August September Total 1) Revenue 310000 330000 320000 960000 Cash collected for current month - 35% 108500 115500 112000 336000 Cash collected for previous month 126000 201500 214500 542000 Total Cash Collected 234500 317000 326500 878000 2 a)    Merchandise Purchase Budget July August September Total Cost of goods sold - 75% of sales 232500 247500 240000 720000 Add : Ending inventory - 30% of the following COGS 74250 72000 76500 222750 Less : opening inventory 69750 74250 72000 216000 Merchandise purchase required 237000 245250 244500 726750 2b)             Schedule of Expected cash Disbursements July August September Total Merchandise purchase required 237000 245250 244500 726750 Cash paid - Current month purchase - 40% 94800 98100 97800 290700 Cash paid - previous month purchase - 60% 81000 142200 147150 370350 Total Cash paid for merchandise purchase required 175800 240300 244950 661050 3)             Income Statement July August September Total Revenue (as per 1 above) 310000 330000 320000 960000 Less : Cost of goods sold ( as per 2a above) 232500 247500 240000 720000 Gross Profit 77500 82500 80000 240000 Less : Selling and administrative expenses 52000 52000 52000 156000 Less : Depriciation 6000 6000 6000 18000 Net Profit 19500 24500 22000 66000 4) Beech Corporation Balance Sheet Dec-31 Assets   Cash 143950 Refer Note 1   Accounts receivable 208000 Refer Note 2   Inventory 76500 Refer 2a above   Plant and equipment, net of depreciation 202000 Refer Note 3   Total assets 630450 0 Liabilities and Stockholders’ Equity   Accounts payable 146700 Refer Note 4   Common stock 348000   Retained earnings 135750 Refer Note 5   Total liabilities and stockholders’ equity 630450 Note 1 as on 30th September opening Cash 83000 Add : Cash receipts ( as per 1 above) 878000 Less : Cash paid for merchandise purchase ( as per 2b above) 661050 Less : Cash paid for selling and distribution expenses 156000 closing balance 143950 Note 2 Accounts Receivable Sales for the month of September 320000 Amount received in September - 35% 112000 Amount rceivable as on 30th September - 65% 208000 Note 3 Plant and equipment net of depriciation as on 30th June 220000 Less Depriciation for 3 months @ 6000 pm 18000 Balance as on 30th September 202000 Note 4 Merchandise purchase required for September 244500 Cash paid - Current month purchase - 40% 97800 Balance accounts payable - 60% 146700 Note 5 Retained Earnings opening balance as on 30th June 69750 Add profit for the period ( July to September) 66000 Closing balance 135750

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