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: a. The cash balance on December 1 is $41,200 b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account S 75,40082,400 97,200 490,000 544.000 629,000 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 c. Purchases of inventory will total S366,000 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 $183,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $472,000 for December. Of this amount, $60,000 is for depreciation. e. A new web server for the Marketing Department costing $96,000 will be purchased for cash during December, and dividends totaling $11,500 will be paid during the month. f. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to bolster the cash position as needed. Required 1. Prepare a schedule of expected cash collections for December December cash sales Collections on account: October sales November sales December sales Total cash collections

Explanation / Answer

SOLUTION

(A) Schedule of expected Cash collections-

(B) Schedule of expected Cash Disbursements -

(C) Cash Budget-

Amount ($) December cash sales 97,200 Collections on account:   October sales: $490,000 * 18% 88,200   November sales: $544,000 * 60% 326,400   December sales: $629,000 * 20% 125,800 Total cash collections 637,600

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