You have been asked to prepare a December cash budget for Ashton Company, a dist

Question

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company's operations:

a. The cash balance on December 1 is $13,500.
b. Actual sales for October and November and expected sales for December are as follows:

October November December
Cash sales $6,100 $4,700 $7,500
Sales on account $24,000 $34,000 $41,000



Sales on account are collected over a three-month period as follows: 5% collected in the month of sale, 65% collected in the month following sale, and 28% collected in the second month following sale. The remaining 2% is uncollectible.
c.

Purchases of inventory will total $30,000 for December. Thirty percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $16,000, all of which will be paid in December.
d. Selling and administrative expenses are budgeted at $16,000 for December. Of this amount, $4,000 is for depreciation.
e. A new Web server for the Marketing Department costing $19,000 will be purchased for cash during December, and dividends totaling $3,000 will be paid during the month.
f. The company maintains a minimum cash balance of $15,000. An open line of credit is available from the company's bank to bolster the cash position as needed.


Requirement 1:
Prepare a schedule of expected cash collections for December. (Omit the "$" sign in your response.)


December cash sales $
Collections on account:
October sales
November sales
December sales
Total cash collections $


Requirement 2:
Prepare a schedule of expected cash disbursements for merchandise purchases for December. (Omit the "$" sign in your response.)


November purchases $
December purchases
Total cash payments $


Requirement 3:

Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month. (The dollar amount of "deficiencies of cash available over disbursements" should be preceded by a minus sign. Enter all other amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)


Ashton Company
Cash Budget
For the Month of December

Cash budget beginning $
(add cash receipts)

Collections from customers$
Total cash available before current financing$

(Less disbursements)

Dividends paid$
Payments to suppliers for inventory$
Selling and administrative expenses $
New web server$

(Total Disbursements)

Deficiency of cash available over disbursements$

(Financing)

Repayments$
Interest$
Borrowings$

(Total Financing)

Cash balance ending$

Explanation / Answer

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