Sales on account are collected over a three-month period as follows: 20% collect

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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 $340,000 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 $173,500, all of which will be paid in December.

Prepare a schedule of expected cash collections for December.

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: Schedule of Expected Cash Collections December cash sales Collections on account: 96,800 October sales November sales December sales 80,100 357,600 125,000 $ 659,500 Total cash collections 2. Prepare a schedule of expected cash disbursements for merchandise purchases for December Schedule of Expected Cash Disbursements Payments to suppliers November purchases December purchases $ 173,500 102,000 $ 275,500 Total cash payments

Explanation / Answer

I understand you want to know the amount to be shown in financing column.

As per point f) above, the company need to maintain $ 20,000 as cash balance at month end. In the given case, there is deficiency of $ 117,000 so the company will have to borrow $ 137,000 to get $ 20,000 as ending cash balance.

Hope this is what is required to be calculated. Please let me know if you need more help.

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