You have been asked to prepare a December cash budget for Ashton Company, a dist
ID: 2556198 • Letter: Y
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:
The cash balance on December 1 is $58,600.
Actual sales for October and November and expected sales for December are as follows:
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 $316,000 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 $162,000, all of which will be paid in December.
Selling and administrative expenses are budgeted at $514,000 for December. Of this amount, $52,000 is for depreciation.
A new web server for the Marketing Department costing $117,500 will be purchased for cash during December, and dividends totaling $12,500 will be paid 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 its cash balance as needed.
Required:
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 borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.
October November December Cash sales $ 73,200 $ 78,000 $ 92,000 Sales on account $ 485,000 $ 568,000 $ 663,000Explanation / Answer
Relevant Answer Particulars December Cash Sales 92000 Sales on Account 663000 Total 755000 1 Cash Collection Budget: Relevant Answer Particulars December Sales on Account 663000 In the Month(20%) 132600 (663000*20%) In the Following Sales Month(60%) 340800 (568000*60%) In the Following Sales 2 Month(18%) 87300 (485000*18%) Total Collections 560700 2 Cash Payment Budget: Particulars December Purchases 316000 In the Month(30%) 94800 (316000*30%) Last Month Purchase Payment 162000 Given' Total Payment for Purchases 256800 3 Cash Budget for the Quarter OND: Particulars December Opening Cash Balance 58600 Total Collections 560700 Total Available Funds 619300 Total Payment for Purchases 256800 Equipment Acquisions 117500 Dividends 12500 S&A Exp Exl Depreciation 462000 514000-52000 Total Payments 848800 Gross Cash Balance -229500 Loan Taken 249500 (20000+229500) Closing Balance 20000 Gross Cash Balance -229500 Required Closing Cash 20000 Loan 249500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.