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Beech Corporation is a merchandising company that is preparing a aster budget for the third quarter of the calendar year. The company's balance sheet as

Beech Corporation is a merchandising company that is preparing a aster 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 Ootober will be $250,000,$270,000
$260,000, and $280,000, respectively.
2 All sales are on credit and all credit sales are collected. Each months credit sales are
collected 35% in the month of sale and 65% in the month following the sale. All of the
acoounts receivable at June 30 will be collected in July.
3 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.
4 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.
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 an common stock or repurchase its
own stock during the quarter ended September 30.
Requsired:
1 Prepare a schedule of expected cash collections for July, August, and September. Also
compute total cash collections for the quarter ended September 30.
2 a. Prepare a merchandise purchases budget for July, August, and September. Also compute
total merchandise purchases for the quarter ended September 30.
b. 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.
3 Using Schedule 9 as your quide, prepare an income statement that computes net operating
income for the quarter ended September 30.
4 Prepare abalance sheet as of September 30.
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