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 $51,200. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 74,200 S 79,600 S 83,600 455,000 550,000 673,000 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 remaining 2% is uncollectible. Purchases of inventory will total 5348,000 for December. Thirty percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from Novembers inventory purchases total 5177,000, all of which will be paid in December Selling and administrative expenses are budgeted at S473,000 for December. Of this amount, $75,000 is c. d. A new web server for the Marketing Department costing 572,000 will be purchased for cash during December, and dividends totaling $17,500 will be paid during the month. 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. e. f. Required: 1. Prepare a schedule of expected cash collections for December. of E December cash sales Collections on account October sales November sales December sales Total cash collections 2. Prepare a schedule of expected cash disbursements for merchandise purchases for December Schedule of Expected Cash Disbursements Payments to suppliers: November purchases Total cash payments

Explanation / Answer

1) Schedule of Expected cash collection December cash sales 83,600 Collections on account October sales (455000*18%) 81900 november sales (550000*60%) 330000 December sales (673000*20%) 134600 Total cash collection 630,100 2) Schedule of Expected Cash Disbursements Payments to suppliers November purchases 177,000 December purchases (346000*30%) 103800 total cash payments 280,800

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