Did I do the Cash budget correct? Please help! You have been asked to prepare a

Question

Did I do the Cash budget correct? Please help!

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 will be $40,000 b. Actual sales for October and November and expected sales for December are as follows October $ 61,000 Sales on account 409,000 November $ 67,000 529,000 December $ 83,300 595,000 Cash sales Sales on account are collected over a three-month period in the following ratio: 18% collected in the month of sale, 62% collected in the month following sale, and 19% collected in the second month following sale. The remaining 1% is uncollectible C. Purchases of inventory will total $281.000 for December, 30% 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. d. Selling and administrative expenses are budgeted at $429,000 for December. Of this amount, $49,000 is e. A new Web server for the Marketing Department costing $75,000 will be purchased for cash during f. The company must maintain a minimum cash balance of $19,000. An open line of credit is available for depreciation. These are paid in the period incurred December, and dividends totalling $8,800 will be paid during the month from the company's bank to bolster the cash position, as needed. Required: 1. Prepare a schedule of expected cash collections for December. ASHTON COMPANY Schedule of Expected Cash Collections December cash sales 83,300 Collections on account October sales November sales December sales 77,710 327,980 107,100 $ 596,090 Total cash collections 2. Prepare a schedule of expected cash disbursements for materials during December to suppliers for inventory purchases ASHTON COMPANY Schedule of Expected Cash Disbursements Payments to suppliers November purchases (accounts payable) December purchases 163,000 84,300 247,300 Total cash payments

Explanation / Answer

Both schedules are correctly done hence not reproduced here. The cash budget is shown below.

The company is required to maintain a minimum cash balance of $19000 however it currently has a cash deficiency of $75010. Hence it will borrow to make good the deficiency and have the required ending balance. Thus, borrowings for March will be $75010 + $19000 = $94010.

Ashton Company Cash Budget For the Month Ending December Cash balance, beginning 40000 Add cash receipts: Collections from customers 596090 Total cash available before current financing 636090 Deduct disbursements: Payments to suppliers for inventory 247300 Selling and administrative expenses ($429000 - $49000) 380000 New web server 75000 Dividends paid 8800 Total disbursements 711100 Excess (deficiency) of cash available over disbursements -75010 Financing: Borrowings 94010 Repayments 0 Interest 0 Total financing 94010 Cash balance, ending 19000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.