mework Problems Help Save & E Chee You have been asked to prepare a December cas

Question

mework Problems Help Save & E Chee 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 $50,800 b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account october November December $ 77, 800 S 83,400 S 99, 800 $ 475, 000 $558, 000 622,000 are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month Sales on account following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible. of inventory will total $375.000 for December. Thirty percent of a month's inventory purchases are paid during the month The accounts payable remaining from November's inventory purchases total $206,500, all of which will be paid in of purchase. December d. Selling and administrative expenses are budgeted at $448,000 for December. Of this amount, $97,200 is for new web server for the Marketing Department costing $80,000 will be purchased for cash during December, and dividends totaling $14,500 will be paid during the month. t. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to increase its cash balance as needed.

Explanation / Answer

1) Calculation of expected cash collection during the month of December : Cash collection from October Sales ( $475,000 * 18%) $     85,500.00 Cash collection from November Sales ( $558,000 * 60%) $ 3,34,800.00 Cash Sales for December $     99,800.00 Cash collection from December Sales ( $622,000 * 20%) $ 1,24,400.00 Expected Cash Collection during December $ 6,44,500.00 2) Calculation of expected cash disbursements for merchandise purchases during the month of December : November's inventory purchases paid in December $ 2,06,500.00 Cash disbursements for December Purchases ($375,000 * 30%) $ 1,12,500.00 Expected cash disbursements for merchandise purchase : $ 3,19,000.00 3) Cash Budget for Ashton Company For Month of December Opening Cash $     50,800.00 Add : Sales cash collection (taken from 1 above) $ 6,44,500.00 Less : Cash disbursements for merchandise purchase ( taken from 2 above) $ -3,19,000.00 Less : Selling and Administrative Expenses $ -3,50,800.00 Less : Amount paid for web server $    -80,000.00 Less : Dividend Paid $    -14,500.00 $ -7,64,300.00 Add : Cash Borrow during the month (see foot note) $     89,000.00 Closing cash in hand (Question requirement) $     20,000.00 Note : Depreciation is not a cash expense. Note : Cash require for December month = Opening Cash + Cash receipts - Cash outflow - Closing Cash = $50,800+$644,500-$319000-$350,800-$80,000-$14,500-$20,000 = $89,000

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