You have been asked to prepare a December cash budget for Ashton Company, a dist
ID: 2574804 • 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: s 67,800 $ 70,480 $ 93,000 Sales on account 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. c Purchases of inventory will total $356,000 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 $164,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $431,000 for December. Of this amount, $54,200 is for depreciation. e. A new web server for the Marketing Department costing $120,500 will be purchased for cash during December, and dividends totaling $13,500 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 increase its cash balance as needed. Required: 1. Calculate the expected cash collections for December 2. Calculate the expected cash disbursements for merchandise purchases for December 3. Prepare a cash budget for D that any interest will not be paid until the following month. ber. Indicate in the financing section any borrowing that will be needed during the month. Assume s in the tabs below. Complete this question by entering your aExplanation / Answer
1. Expected Cash Collection in December = (20%*$614,000) + (60%*$562,000) + (18%*465,000)
=> $122,800 + $337,200 + $83,700
= $543,700
Cash Sales = $93,000
Total Cash Collection = $543,700 + $93,000 = $636,700
2. Expected cash disbursement for merchandise purchase = $164,000 + (30%*$356,000) = $270,800
3.
Ashton Company
Cash Budget
For the Month of December
Beginning cash balance
$45,400.00
Add: Collections from customers
$636,700.00
Total Cash Available
$682,100.00
Less: Cash Disbursement
Payments to supplier for inventory
$270,800.00
Selling and administrative expense ($431,000-$54,200)
$376,800.00
New web server
$120,500.00
Dividends paid
$13,500.00
Total Cash Disbursement
$781,600.00
Excess (deficiency) of cash available over disbursement
-$99,500.00
Financing:
Borrowings ($99,500 + $20,000)
$119,500.00
Repayment
$0.00
Interest
$0.00
Total Financing
$119,500.00
Ending Cash Balance
$20,000.00
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Ashton Company
Cash Budget
For the Month of December
Beginning cash balance
$45,400.00
Add: Collections from customers
$636,700.00
Total Cash Available
$682,100.00
Less: Cash Disbursement
Payments to supplier for inventory
$270,800.00
Selling and administrative expense ($431,000-$54,200)
$376,800.00
New web server
$120,500.00
Dividends paid
$13,500.00
Total Cash Disbursement
$781,600.00
Excess (deficiency) of cash available over disbursement
-$99,500.00
Financing:
Borrowings ($99,500 + $20,000)
$119,500.00
Repayment
$0.00
Interest
$0.00
Total Financing
$119,500.00
Ending Cash Balance
$20,000.00
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