Beech Corporation is a merchandising company that is prepari

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

Estimated sales for July, August, September, and October will be $390,000, $410,000, $400,000, and $420,000, 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 $54,000. Each month $7,000 of this total amount is depreciation expense and the remaining $47,000 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:

4. Prepare a balance sheet as of September 30.

Beech Corporation
Balance Sheet
June 30
Assets
Cash	$	96,000
Accounts receivable		139,000
Inventory		70,200
Plant and equipment, net of depreciation		228,000
Total assets	$	533,200
Liabilities and Stockholders’ Equity
Accounts payable	$	89,000
Common stock		333,000
Retained earnings		111,200
Total liabilities and stockholders’ equity	$	533,200

Solution

Schedule of Expected Cash Collections July August September Quarter From Accounts receivable 139,000 139,000 From July sales (390,000*45%;55%) 175500 214500 390000 From August sales (410,000*45%;55%) 184500 225500 410000 From September sales (400,000*45%) 180000 180000 Total cash collections 314,500 399000 405500 1,119,000 Accounts receivable 400,000*55%= 220000 2-a) Merchandise Purchase Budget July August September Total october Budgeted cost of goods sold (60% of sales) 234000 246000 240000 720000 252000 Add:Desired ending merchandise inventory 49200 48000 50400 50400 total needs 283200 294000 290400 770400 less: Beginning merchandise inventory 70,200 49200 48000 70,200 Required purchased 213,000 244800 242400 700,200 2-b) Schedule of Cash Disbursement for purchases July August September Total From Accounts payable 89,000 89,000 From July purchases (213000*30%;70%) 63900 149100 213000 From august purchases (244,800*30%;70%) 73440 171360 244800 From September purchases (242400*30%) 72720 72720 total cash disbursements 152,900 222540 244080 619,520 Accounts payable 242400*70% 169680 3) Income Statement Sales 1200000 cost of goods sold (1200000*60%) 840000 Gross profit 480000 Selling and administrative expense (54000*3) 162000 net operating income 318000 interest expense 0 net income (loss) 318000 4) Balance sheet Assets Cash (96000+1,119,000-619520 -47000*3) 454,480 Account receivable 220000 inventory 50400 Plant and Equipment,net (228000-7000*3) 207000 Total Assets 931880 Liabilities and Stockholders Equity Accounts payable 169680 Capital Stock 333,000 Retained earnings (111200+318000) 429200 Total liabilities & Stockholder\'s Equity 931880