Schedules of Expected Cash Collections and Disbursements; Income Statement; Bala
ID: 2395534 • Letter: S
Question
Schedules of Expected Cash Collections and Disbursements; Income Statement; Balance Sheet [LO7-2, LO7-4, LO7-9, LO7-10]
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:
Exercise 7-12
Estimated sales for July, August, September, and October will be $350,000, $370,000, $360,000, and $380,000, 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 30% of the cost of next month’s 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 $46,000. Each month $7,000 of this total amount is depreciation expense and the remaining $39,000 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.
Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.
Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
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.
Prepare an income statement for the quarter ended September 30 using an absorption income statement format.
Prepare a balance sheet as of September 30.
[The following information applies to the questions displayed below.]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 CorporationBalance Sheet
June 30 Assets Cash $ 74,000 Accounts receivable 143,000 Inventory 73,500 Plant and equipment, net of depreciation 224,000 Total assets $ 514,500 Liabilities and Stockholders’ Equity Accounts payable $ 85,000 Common stock 310,000 Retained earnings 119,500 Total liabilities and stockholders’ equity $ 514,500
Exercise 7-12
Beech’s managers have made the following additional assumptions and estimates: 1.Estimated sales for July, August, September, and October will be $350,000, $370,000, $360,000, and $380,000, respectively.
2.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.
3.Each month’s ending inventory must equal 30% of the cost of next month’s 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.
4.Monthly selling and administrative expenses are always $46,000. Each month $7,000 of this total amount is depreciation expense and the remaining $39,000 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.
Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.
Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.
2-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.Prepare an income statement for the quarter ended September 30 using an absorption income statement format.
4.Prepare a balance sheet as of September 30.
Explanation / Answer
Schedule of Expected Cash Collections July August September Quarter From Accounts receivable 143,000 143,000 From July sales (350,000*35%;65%) 122500 227500 350000 From August sales (370,000*35%;65%) 129500 240500 370000 From September sales (360,000*35%) 126000 126000 Total cash collections 265,500 357000 366500 989,000 Accounts receivable 360,000*65%= 234000 2-a) Merchandise Purchase Budget July August September Total october Budgeted cost of goods sold (70% of sales) 245000 259000 252000 756000 266000 Add:Desired ending merchandise inventory 77700 75600 79800 79800 total needs 322700 334600 331800 835800 less: Beginning merchandise inventory 73,500 77700 75600 73,500 Required purchased 249,200 256900 256200 762,300 2-b) Schedule of Cash Disbursement for purchases July August September Total From Accounts payable 85,000 85,000 From July purchases (249200*40%;60%) 99680 149520 249200 From august purchases (256,900*40%;60%) 102760 154140 256900 From September purchases (256200*40%) 102480 102480 total cash disbursements 184,680 252280 256620 693,580 Accounts payable 256200*60% 153720 3) Income Statement Sales 1080000 cost of goods sold (1080000*70%) 756000 Gross profit 324000 Selling and administrative expense (46000*3) 138000 net operating income 186000 interest expense 0 net income (loss) 186000 4) Balance sheet Assets Cash (74000+989,000-693580 -39000*3) 252,420 Account receivable 234000 inventory 79800 Plant and Equipment,net (224,000-7000*3) 203000 Total Assets 769220 Liabilities and Stockholders Equity Accounts payable 153720 Capital Stock 310,000 Retained earnings (119500+186,000) 305500 Total liabilities & Stockholder's Equity 769220
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