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:

   

Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.

Purchases of inventory will total $372,000 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 $189,500, all of which will be paid in December.

  

  

Prepare a schedule of expected cash disbursements for merchandise purchases for December.

  

  

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.

  

a. The cash balance on December 1 is $47,000. b. Actual sales for October and November and expected sales for December are as follows:

Explanation / Answer

oct nov dec

cash sales 83000 79000 85600

sales on account 500000 624000 674000

cash collection for dec 85600

cash collection for:-

oct sales on discount 500000*18%=90000

nov sales on discount=624000*60 =374400

dec sales on discount=674000*20%=134800

Total expected December cash collections $684800

2)schedule of expected cash disbursements

payment to suppliers

november purchase 189500

december purchase 111600 (372000*30%)

total cash payment 301100

3) aston company

cash budget

beginning cash balance 47000

add collection from customer 684800

total cash available 371800

less cash disbursment:-

payment to suppliers for inventory 301100

selling and administrative expense 433000

new web server 88500

dividend [paid 14500

total cash disbursment 837100

excess( deficiency) of cash avialable over disbursment (105300)

financing:-------

borrowing 125300

repayments

interest

total financing 125300

ending cash balance 20000

d

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