Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below:
Beech Corporation |
Balance Sheet |
June 30 |
Assets
|
|
|---|
Cash |
$ 84,000 |
|---|
Accounts receivable |
144,000 |
|---|
Inventory |
63,750 |
|---|
Plant and equipment, net of depreciation |
223,000 |
|---|
Total assets |
$ 514,750 |
|---|
Liabilities and Stockholders’ Equity
|
|
|---|
Accounts payable |
$ 84,000 |
|---|
Common stock |
349,000 |
|---|
Retained earnings |
81,750 |
|---|
Total liabilities and stockholders’ equity |
$ 514,750 |
|---|
Beech’s managers have made the following additional assumptions and estimates:
Estimated sales for July, August, September, and October will be $340,000, $360,000, $350,000, and $370,000, respectively.
All sales are on credit and all credit sales are collected. Each month’s 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 month’s ending inventory must equal 25% 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.
Monthly selling and administrative expenses are always $44,000. Each month $6,000 of this total amount is depreciation expense and the remaining $38,000 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.
2-a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
Extracted text: Req 1 Req 2A Req 2B Req 3 Req 4 Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise pur quarter ended September 30. Merchandise Purchases Budget July August September Quarter Budgeted cost of goods sold $ 255,000 $ 270,000 $ 262,500 $ 787,500 Add: Desired ending merchandise inventory 67,500 65,625 69,375 69,375 Total needs 322,500 335,625 331,875 856,875 Less: Beginning merchandise inventory Required purchases 63,750 67,500 65,625 63,750 $ 258,750 $ 268,125 $ 266,250 $ 793,125
Extracted text: ! Required information 4. Prepare a balance sheet as of September 30. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3 Req 4 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 $ 144,000 $ 144,000 From July sales 119,000 221,000 340,000 From August sales 126,000 234,000 360,000 From September sales 122,500 122,500 Total cash collections $ 263,000 $ 347,000 $ 356,500 $ 966,500