You have been asked to prepare a December cash budget for Ashton Company, a dist
ID: 2560780 • 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: a. The cash balance on December 1 is $40,000. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account s 65,000 70,000 83,000 $ 400,000 525,000 600,000 Book Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% colected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible. Print c. Purchases of inventory will total $280,000 for December. Thity percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $161 .000, all of which will be paid in December d. Selling and administrative expenses are budgeted at $430,000 for December. Of e. A new web server for the Marketing Department costing $76,000 will be purchased for cash during December, and dividends f this amount $50,000 is for depreciation totaling $9,000 will be paid during the month t. The company maintains a minimum cash balance of $20,000. An open line ofcredit 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. Complete this question by entering your answers in the tabs below. Req 1 and 2 Required 3 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December Next >Explanation / Answer
cash sales
65000
70000
83000
credit sale
400000
5250000
600000
December
opening balance of cash
40000
cash sales
83000
credit sales collection
20% of month sale
120000
60% of previous month sale
42000
18% of october sale
72000
total cash receipts
317000
total cash available
471000
total cash disbursement
payment to supplier
30% of month purchase =280000*30%
84000
payment of the month of november
161000
total payment to supplier
245000
selling expenses
425000
web sever
76000
dividend
9000
total cash disbursement
755000
cash available during the month
-284000
minimum cash balance
20000
amount to be borrowed
-304000
cash sales
65000
70000
83000
credit sale
400000
5250000
600000
December
opening balance of cash
40000
cash sales
83000
credit sales collection
20% of month sale
120000
60% of previous month sale
42000
18% of october sale
72000
total cash receipts
317000
total cash available
471000
total cash disbursement
payment to supplier
30% of month purchase =280000*30%
84000
payment of the month of november
161000
total payment to supplier
245000
selling expenses
425000
web sever
76000
dividend
9000
total cash disbursement
755000
cash available during the month
-284000
minimum cash balance
20000
amount to be borrowed
-304000
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