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Schedules of Expected Cash Collections and Disbursements; Income Statement; Balance Sheet [LO8-2, LO8-4, LO8-9, LO8-10]

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Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The companys balance sheet as of June 30th is shown below:

Beech Corporation
Balance Sheet
June 30
Assets
Cash	$ 75,000
Accounts receivable	140,000
Inventory	66,500
Plant and equipment, net of depreciation	227,000
Total assets	$ 508,500
Liabilities and Stockholders Equity
Accounts payable	$ 88,000
Common stock	311,000
Retained earnings	109,500
Total liabilities and stockholders equity	$ 508,500

Exercise 8-12 (Algo)

Beechs managers have made the following additional assumptions and estimates:

Estimated sales for July, August, September, and October will be $380,000, $400,000, $390,000, and $410,000, 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 70% 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 $52,000. Each month $7,000 of this total amount is depreciation expense and the remaining $45,000 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.

Required:

1. Prepare a schedule of expected cash collections for July, August, and September.

Schedule of Expected Cash Collections
	Month			Quarter
	July	August	September
From accounts receivable	$140,000	$0	$0	$140,000
From July sales	133,000	247,000	0	380,000
From August sales	0	140,000	260,000	400,000
From September sales	0	0	136,500	136,500
Total cash collections	$273,000	$387,000	$396,500	$1,056,500

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

Merchandise Purchases Budget
	July	August	September	Quarter
Budgeted cost of goods sold
Add: Desired ending merchandise inventory
Total needs
Less: Beginning merchandise inventory
Required purchases

2-b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September.

Schedule of Cash Disbursements for Purchases
	July	August	September	Quarter
From accounts payable				$
From July purchases
From August purchases
From September purchases
Total cash disbursements	$	$	$	$

3. Prepare an income statement that computes net operating income for the quarter ended September 30.

Beech Corporation
Income Statement
For the Quarter Ended September 30
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income	$

4. Prepare a balance sheet as of September 30.

Beech Corporation
Balance Sheet
September 30
Assets
Cash
Accounts receivable
Inventory
Plant and equipment, net
Total assets	$
Liabilities and Stockholders' Equity
Accounts payable
Common stock
Retained earnings
Total liabilities and stockholders' equity	$.