Estimated sales for July, August, September, and October will be $240,000, $260,

Question

Estimated sales for July, August, September, and October will be $240,000, $260,000, $250,000, and $270,000, 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 15% 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 $44,000. Each month $8,000 of this total amount is depreciation expense and the remaining $36,000 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.

  

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

Explanation / Answer

I absence of information the following are assumed:

June 30 receivables = $129,000

June 30 payables = $78,000

June 30 cash balance = 0

Sales Budget July August September Total Budegeted Sales 240000 260000 250000 750000 Schedule of expected cash collections: July August September Total Credit Sales: June Sales 129000 129000 July Sales 108000 132000 240000 August Sales 117000 143000 260000 September Sales 112500 112500 Total Collections 237000 249000 255500 741500 Merchandise purchase budget July August September Total Cost of goods sold (60%) of sales 144000 156000 150000 450000 Add: Ending inventory 23400 22500 24300 24300           (15% of next month's cost) Total cost of goods neded 167400 178500 174300 474300 Less: Beginning inventory 21600 23400 22500 21600 Budgeted purchases 145800 155100 151800 452700 Schedule of cash disbursements for purchases July August September Total Budgeted purchases 145800 155100 151800 452700    June Purchases 78000 78000    July Purchases 43740 102060 145800    August Purchases 46530 108570 155100    September Purchases 45540 45540 Cash payment for purchases 121740 148590 154110 424440 Schedule of cash payments S&A expenses July August September Total Cash Expenses 36000 36000 36000 108000 Depreciation expense 8000 8000 8000 24000 Total S & A expenses 44000 44000 44000 132000 Cash Budget July August September Total Beginning cash balance 0 79260 143670 0 Add: Collections 237000 249000 255500 741500 Total cash available 237000 328260 399170 741500 Cash disbursements:      For purchases 121740 148590 154110 424440      For S& A expenses 36000 36000 36000 108000 0 0 Total cash disbursements 157740 184590 190110 532440 Ending Cash Balance 79260 143670 209060 209060 Excess / (Shortage) 79260 143670 209060 209060 Financing: 0 0 Total Financing 0 0 0 0 Ending Cash Balance 79260 143670 209060 209060 BEECH CORPORATION Budgeted Income statement for the quarter ending September 30 Sales 750000 Less: Cost of goods sold 450000 Gross profit 300000 Less: Operating expenses            Depreciation 24000            Other operating expenses 108000 Total operating expenses 132000 Net operating income 168000

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