Exercise 7-14 Schedules of Expected Cash Collections and Disbursements; Income Statement; Balance Sheet [LO2, LO4, LO9, LO10]

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	$	94,000
Accounts receivable		154,000
Inventory		54,600
Plant and equipment, net of depreciation		340,000
Total assets	$	642,600
Liabilities and Stockholders Equity
Accounts payable	$	73,500
Common stock		440,000
Retained earnings		129,100
Total liabilities and stockholders equity	$	642,600

Colerains managers have made the following additional assumptions and estimates:

1.	Estimated sales for July, August, September, and October will be $260,000, $280,000, $270,000, and $290,000, 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 accounts receivable at June 30 will be collected in July.
3.	Each months ending inventory must equal 35% of the cost of next months sales. The cost of goods sold is 60% 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 $86,000. Each month $7,000 of this total amount is depreciation expense and the remaining $79,000 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 30th. (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.)

	Schedule of Expected Cash Collections
	July	August	September	Total
From accounts receivable	$	$	$	$
From July sales
From August sales
From September sales
Total cash collections	$	$	$	$

2a.	Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30th. (Input all amounts as positive values. Do not round intermediate calculations.)

Merchandise Purchases Budget
	July	August	September	Total
Budgeted cost of goods sold	$	$	$	$
(Click to select)Deduct:Add: (Click to select)Beginning inventoryEnding inventory
Total needs
(Click to select)Deduct:Add: (Click to select)Beginning inventoryEnding 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. Leave no cells blank - be certain to enter "0" wherever required.)

Schedule of Expected Cash DisbursementsMerchandise Purchases
	July	August	September	Total
From accounts payable	$	$	$	$
For July purchases
For August purchases
For September purchases
Total cash disbursements	$	$	$	$

3.	Prepare an income statement for the quarter ended September 30th. (Input all amounts as positive values except losses which should be indicated by a minus sign. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required.)

Colerain Corporation Income Statement For the Quarter Ended September 30
(Click to select)Cost of goods soldSelling and administrative expensesInterest expenseNet operating income (loss)Net income (loss)SalesGross margin	$
(Click to select)Interest expenseSalesGross marginNet operating income (loss)Net income (loss)Selling and administrative expensesCost of goods sold
(Click to select)Interest expenseNet income (loss)Cost of goods soldGross marginNet operating income (loss)SalesSelling and administrative expenses
(Click to select)Net income (loss)Gross marginInterest expenseCost of goods soldSelling and administrative expensesSalesNet operating income (loss)
(Click to select)SalesGross marginNet operating income (loss)Interest expenseSelling and administrative expensesCost of goods soldNet income (loss)
(Click to select)Selling and administrative expensesInterest expenseSalesNet operating income (loss)Gross marginCost of goods soldNet income (loss)
(Click to select)Selling and administrative expensesInterest expenseNet operating income (loss)Gross marginCost of goods soldSalesNet income (loss)	$

4.	Prepare a balance sheet as of September 30th. (Be sure to list the assets and liabilities in order of their liquidity. Do not round intermediate calculations.)

Colerain Corporation Balance Sheet September 30
Assets
(Click to select)Capital stockAccounts payableRetained earningsCashNotes payable	$
(Click to select)Accounts receivableRetained earningsCapital stockNotes payableAccounts payable
(Click to select)InventoryPlant and equipment, netCapital stockAccounts payableRetained earnings
(Click to select)Capital stockAccounts payableInventoryRetained earningsPlant and equipment, net
Total assets	$
Liabilities and Stockholders' Equity
(Click to select)CashAccounts receivableAccounts payableNotes receivableInventory	$
(Click to select)Accounts receivableCashInventoryCapital stockPlant and equipment, net
(Click to select)Plant and equipment, netRetained earningsCashAccounts receivableInventory
Total liabilities and stockholders' equity	$