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 equipment. The following information is available about the company’s operations:

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 $338,000 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 $163,000, all of which will be paid in December.

Prepare a schedule of expected cash disbursements for merchandise purchases for December.

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.

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:

Explanation / Answer

Ashton Company Cash Balance 1st December $        51,800.00 Actual sales October November December Cash sales $        80,000.00 $      82,000.00 $       89,200.00 Sales on account $      470,000.00 $   503,000.00 $     638,000.00 1) Prepare of Expected cash collection for December December cash Sales $        89,200.00 Collection on account: October Sales $        84,600.00 November Sales $      301,800.00 December Sales $      127,600.00 Total cash collection $      603,200.00 Purchases of inventory $      338,000.00 Balance of November Purchases $      163,000.00 2) Prepare a schedule of expected cash disbursements for merchendise purchases for December Payment to suppliers: November Purchases $      163,000.00 December Purchases $      101,400.00 Total Cash Payment $      264,400.00 3) Ashton Company Cash Budget For the month of December Beginning Cash Balance $        51,800.00 Add: Collection form customer $      603,200.00 Total Cash available $      655,000.00 Less: Cash disbursement: Payment to suppliers for inventory $      264,400.00 Selling and administerative expenses $      434,000.00 New Web Server $        98,000.00 Dividend paid $        16,000.00 Total cash disbursements $      812,400.00 Excess(Deficiency ) of cash available over disbursement $    (157,400.00) Financing: Borrowings $      177,400.00 Repayment Interest Total Financing $      177,400.00 Ending Cash balance $        20,000.00

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