Question

(N ONE)    Beech Corporation is a merchandising company that is preparing a master budget for...

(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.

Homework Answers

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
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