Question

(N ONE)    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 . . . . . . . . . . . . . . . . . . . . . . . . . .                               . . . $ 90,000

Accounts receivable . . . . . . . . . . . . . .                                . . . 136,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .                               62,000

Plant and equipment, net of depreciation . . . . . . . . . . . . . . 210,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . $ 498,000

Liabilities and Stockholders’ Equity

Accounts payable . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . $ 71,100

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 327,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,900

Total liabilities and stockholders’ equity . . . . . . . . .. . . . . . . $ 498,000

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

1.       Estimated sales for July, August, September, and October will be $ 210,000, $ 230,000,       $220,000, and $ 240,000, respectively.

2.       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.

3.       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.

Required:

Using the new assumptions described above, complete the following requirements:

1.                         Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30.

2.                         Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30.

Answer 1

EXPECTED CASH COLLECTIONS
			July	Aug	Sep	QUARTER
June Mmonth Accounts receivable			136,000			136,000
July Month sale			94,500	115500		210,000
Aug Months sales				103500	126500	230,000
Sep months sales					99,000	99,000
Total Cash Collections			230,500	219,000	225,500	675,000
RAW MATERIAL PURCHASE BUDGET
			July	Aug	Sep	QUARTER	Oct
Budgeted Sales in $			210,000	230,000	220,000	660,000	240,000
Cost of Goods sold			60%	60%	60%	60%	60%
Cost of Goods sold in $			126,000	138,000	132,000	396,000	144,000
Add: Desired Ending Inventory			27,600	26,400	28,800	28,800
Total needs			153,600	164,400	160,800	424,800
Less: Beginning Inventory			62,000	27,600	26,400	62,000
Budgeted Purchases in $			91,600	136,800	134,400	362,800