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 Corporation Balance Sheet June 30 Assets Cash Accounts receivable Inventory Plant and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 91,000 133,000 36,000 213,000 $ 473,000 $ 74,000 328,000 71,000 $ 473,000 Beech's managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $240,000, $260,000, $250,000, and $270,000, respectively. 2. 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. 3. Each month's ending inventory must equal 15% 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. 4. Monthly selling and administrative expenses are always $44,000. Each month $8,000 of this total amount is depreciation expense and the remaining $36,000 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 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 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. 2-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. Prepare an income statement for the quarter ended September 30. 4. Prepare a balance sheet as of September 30. Beech Corporation Income Statement For the Quarter Ended September 30 From accounts receivable From July sales From August sales From September sales Total cash collections Schedule of Expected Cash Collections Month July August September $ 133,000 108,000 132,000 117,000 143,000 112,500 | $ 241,000 $ 249,000 $ 255,500 Quarter $ 133,000 240,000 260,000 112,500 $ 745,500 Quarter September $ 150,000 Merchandise Purchases Budget July August Budgeted cost of goods sold $ 144,000 $ 156,000 Add: Desired ending merchandise inventory Total needs Less: Beginning merchandise inventory Required purchases Beech Corporation Balance Sheet September 30 Assets Quarter Schedule of Cash Disbursements for Purchases July August September From accounts payable From July purchases From August purchases From September purchases Total cash disbursements $ 0 $ 0 $ 0 $ Total assets Liabilities and Stockholders' Equity $ Total liabilities and stockholders' equity $
