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:

1. The cash balance on December 1 is $47,000.

2. Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	83,000	$	79,000	$	85,600
Sales on account	$	500,000	$	624,000	$	674,000

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.

3. Purchases of inventory will total $372,000 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 $189,500, all of which will be paid in December.

4. Selling and administrative expenses are budgeted at $502,000 for December. Of this amount, $69,000 is for depreciation.

5. A new web server for the Marketing Department costing $88,500 will be purchased for cash during December, and dividends totaling $14,500 will be paid during the month.

6. 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 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.

req 1 and 2

1. Calculate the expected cash collections for December.

2. Calculate the expected cash disbursements for merchandise purchases for December.

	Total cash collections Total cash disbursements

req 3

Calculate the expected cash disbursements for merchandise purchases for December.

Ashton Company Cash Budget For the Month of December Beginning cash balance Add collections from customers Total cash available 0 Less cash disbursements: Payments to suppliers for inventory Selling and administrative expenses New web server Dividends paid Total cash disbursements 0 Excess (deficiency) of cash available over disbursements 0 Financing: Borrowings Repayments Interest Total financing 0 Ending cash balance $0

Answer 1

Answer Req 1 and 2

Total cash collections	$ 684,800
Total cash disbursements	$ 837,100

Answer Req 3

Ashton Company
Cash Budget
For the Month of December
Beginning cash balance		$ 47000
Add collections from customers		$ 684,800
Total cash available		$ 731,800
Less cash disbursements:
Payments to suppliers for inventory	$ 301,100
Selling and administrative expenses	433000
New web server	88500
Dividends paid	14500
Total cash disbursements	$ 837,100	$ 837,100
Excess (deficiency) of cash available over disbursements		$(105,300)
Financing:
Borrowings		125300
Repayments		0
Interest		0
Total financing		125300
Ending cash balance		$   20,000

Detailed Workings

Calculation of Cash Collection
Cash Sales	$          85,600
Sales On Account
For October Sales = 500000*18%	$          90,000
For November Sales = 624000*60%	$        374,400
For December Sales = 674000*20%	$        134,800
Total Cash Collections	$        684,800
Calculation of Total Cash Disbursements
For Purchase in December = $372000*30%	$        111,600
For November Accounts payable	$        189,500
Payment for Inventory purchase	$        301,100
Selling and administrative expenses	433000
New web server	88500
Dividends paid	14500
Total Cash disbursements	$        837,100

Hit Thumbs up if satisfied

Have any query mention in comment section please

Thank you