Beechs managers have made the following additional assumptions and estimates:

Estimated sales for July, August, September, and October will be $400,000, $420,000, $410,000, and $430,000, respectively.

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 accounts receivable at June 30 will be collected in July.

Each months ending inventory must equal 25% of the cost of next months 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 $56,000. Each month $8,000 of this total amount is depreciation expense and the remaining $48,000 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.

This is a great "review" problem that allows you to prepare several budgets & schedules that are part of a company's master budget. You will start with the sales budget (including cash collections) and continue through to the budget income statement and balance sheet.

Required:

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