EXERCISE $8-12$ Schedules of Expected Cash Collections and Disbursements; Income Statement; Balance Sheet

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 $30$th is shown below:

Beech's managers have made the following additional assumptions and estimates:

$1$ Estimated sales for July, August, September and October 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

accounts 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 $30.$

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 $30.$

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 guide, prepare an income statement that computes net operating

income for the quarter ended September $30.$

$4$ Prepare a balance sheet as of September $30.$