Beech Corporation is a merchandising company that is preparing a master budget f

Question

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:

Estimated sales for July, August, September, and October will be $270,000, $290,000, $280,000, and $300,000, respectively.

All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 45% in the month of sale and 55% 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 20% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays for 30% of its merchandise purchases in the month of the purchase and the remaining 70% 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 $50,000. Each month $5,000 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.

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:

Explanation / Answer

Amnswer 1 Schedule of Expected Cash flow Month Total July August September From Account Receivable 130000 0 0 130000 From July Sales 121500 148500 0 270000 From August Sales 0 130500 159500 290000 From September Sales 0 0 126000 126000 Total Cash Collection 251500 279000 285500 816000 Answer 2 a Merchandise Purchase Budget Month Total July August September Budgeted Cost of goods sold 162000 168000 174000 504000 Add: Desirable ending inventory 56000 58000 60000 174000 Total Needs 218000 226000 234000 678000 Less: Beginning merchandise Inventory 48600 56000 58000 162600 Required Purchase 169400 170000 176000 515400 Answer 2 b Schedule ofCash disbursement of purchase Month Total July August September From Account Payable 77000 0 0 77000 From July purchases 50820 118580 0 169400 From August Purchases 0 51000 119000 170000 From September Purchases 0 0 52800 52800 Total Cash disbursement 127820 169580 171800 469200 Answer 3 Beech Corporation Income Statement For the Quarter Ended September 30 Sales 840000 Cost of goods sold 504000 Gross Margin 336000 Selling & Administrative Expenses 150000 Net Operating Income 186000 Answer 4 Beech Corporation Balance Sheet September 30 Assets Cash 303800 Account Receivable 154000 Inventory 60000 Plant and equipment, net of depreciation 201000 Total Assets 718800 Liabilities & Stock holder equity Account Payable 123200 Common Stock 329000 Retained Earning 266600 Total Liabilities & Stock holder equity 718800

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