You have been asked to prepare a December cash budget for Ashton Company, a dist
ID: 2597260 • 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 $45,400 b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account $67.800 $70.400 93.000 465,000 562,000 614,000 hs on account are cotected overathree-month period as follows: 20% cotected in the month of sale, 60% colected inthe month folowing sale, and 18% colected in the second month follo ng sale. The remai c. Purchases of inventory will total $356,000 for December. Thirty percent of a month's inventory purchases are pald during the month of purchase. The accounts payable remaining from November's inventory purchases total $164,000, ail ofwhich will be paid in December d. Seling and administrative expenses are budgeted at $431,000 for December. Of this amount, $54,200 is for depreciation. e. Anew web server for the Marketing Department oosting $120,500 will be purchased for cash during December, and dividends totaling $13,500 will be paid during the month. t. The company maintains a minimum cash balance of $20,000, An open Ine of credit is available from the company's bank to bolster the cash position as needed Required: 1. Prepare a schedue of expected cash colections for December of E December cash sales December sales Total cash collections 93,000Explanation / Answer
1) schedule of expected cash collections for December
December cash sales
$93,000
Collections on accounts:
October sales(465,000*18%)
$83,700
November sales(562,000*60%)
$337,200
December sales(614,000*20%)
$122,800
Total cash collected
$636,700
2) a schedule of expected cash disbursements for merchandise purchases for December
Payment to suppliers
November sales(accounts receivable)
$164,000
December purchases(356,600*30%)
$106,800
Total cash payment
$270,800
3) Ashton company cash budget for the month of December
cash balance, beginning
$45,000
Add cash receipts: Collected from customers
$636,700
Total cash available before current financing
$681,700
Less disbursements:
Payment to suppliers for inventory
$270,800
Selling and administrative expenses
$425,600
(431,000-54,200 depreciation)
New web server
$120,500
Dividends paid
$13,500
Total disbursements:
$830,500
Excess (deficiency) of cash available over disbursements
($148,700)
Financing:
Borrowings
$168,700
Repayments
$0
Interest
$0
Total financing
$168,700
Cash balance, ending
$20,000
December cash sales
$93,000
Collections on accounts:
October sales(465,000*18%)
$83,700
November sales(562,000*60%)
$337,200
December sales(614,000*20%)
$122,800
Total cash collected
$636,700
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