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 equlpment. The following Information is avallable about the company's operations: a. The cash balance on December 1 is $45,400. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 67,888 $7e,488 $ 93,9ee $ 465,808 562,0 614,9e8 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. c. Purchases of Inventory will total $356,000 for December. Thlrty percent of a month's Inventory purchases are pald during the month of purchase. The accounts payable remalning from Novembers Inventory purchases total $164,000, all of which will be pald In December d. Selling and administrative expenses are budgeted at $431,000 for December. Of this amount, $54,200 Is for depreclation. e. A new web server for the Marketing Department costing $120,500 wll be purchased for cash during December, and dividends totaling $13,500 will be pald during the month. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to Increase lts cash balance as needed. · Requlrec 1. Calculate the expected cash collections for December. 2 Calculate the expected cash disbursements for merchandise purchases for December. 3. Prepare a cash budget for December. Indicate In the financing section any borrowlng that will be needed during the month. Assume that any Interest will not be pald until the following month. Complete this question by entering your answers in the tabs below Req 1 and 2 Req 3 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December. Total cash collections Total cash disbursements Req 1 and 2 Req 3

Explanation / Answer

Expected cash collections:

Expected cash disbursements:

Cash Budget for December :

Expected cash collections October November December Cash sales $    67,800.00 $    70,400.00 $    93,000.00 Credit Sales $ 465,000.00 $ 562,000.00 $ 614,000.00 Collection from Current Month Sales(20%) $    93,000.00 $ 112,400.00 $ 122,800.00 Collection from Previous Month Sales (60%) $ 279,000.00 $    67,440.00 Total      391,400.00      190,240.00

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