Colerain Corporation is a merchandising company that is preparing a profit plan for the third quarter of the calendar year. The companys balance sheet as of June 30 is shown below:

Colerain Corporation Balance Sheet June 30

ASSETS

Cash	$ 86,000
Accounts receivable	127,000
Inventory	50,400
Plant and equipment, net of depreciation	220,000
Total assets	$ 483,400
Liabilities and Stockholders Equity
Accounts payable	$ 61,500
Common stock	360,000
Retained earnings	61,900
Total liabilities and stockholders equity	$ 483,400

Colerains 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 months credit sales are collected 40% in the month of sale and 60% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3.

Each months ending inventory must equal 30% of the cost of next months sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% 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 $50,000. Each month $4,000 of this total amount is depreciation expense and the remaining $46,000 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.

Schedule of Expected Cash Collections
	July	August	September	Quarter
Accounts receivable, beginning balance	$127,000	$0	$0	127,000
From July sales	96,000	144,000	0	240,000
From August sales	0	104,000	156,000	260,000
From September sales	0	0	100,000	100,000
Total cash collections	$223,000	$248,000	$256,000	$727,000

2a.

Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30th.(Do not round intermediate calculations.)

Merchandise Purchases Budget
	July	August	September	Quarter
Budgeted cost of goods sold	$168,000	$182,000	$175,000	?
Add: Ending inventory	54,600	52,500	56,700	?
Total needs	?	?	?	?
Deduct: Beginning inventory	?	?	?	?
Required purchases	?	?	?

2b.

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 30th. (Do not round intermediate calculations.)

3.	Prepare an income statement for the quarter ended September 30th.(Do not round intermediate calculations.) Prepare a balance sheet as of September 30th. (Do not round intermediate calculations.)