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 $53,200. b. Actual sales for October and November and expected sales for December are shown below. 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. November $ 89,e00 574,000 October December $ 75,600 410,000 Cash sales $ 88,200 Sales on account 609,000 c. Purchases of inventory will total $318,000 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 $172.000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $525,000 for December. Of this amount, $57,700 is for depreciation. e. A new web server for the Marketing Department costing $82,000 will be purchased for cash during December, and dividends totalling $12,000 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.

Answer 1

Answer 1

Calculation of Cash Collection
December Cash Sales	$              88,200
Collections On Account
October Sales = 410000*18%	$              73,800
November Sales = 574000*60%	$            344,400
December Sales = 609000*20%	$            121,800
Total Cash Collections	$            628,200

Answer 2

Calculation of Total Cash Disbursements
Payments to suppliers
November Purchases	$              95,400
December Purchases	$            172,000
Total Cash Payments	$            267,400

Answer 3

Ashton Company
Cash Budget
For the Month of December
Beginning cash balance		53200
Add collections from customers		$ 628,200
Total cash available		$ 681,400
Less cash disbursements:
Payments to suppliers for inventory	$ 267,400
Selling and administrative expenses	467300
New web server	82000
Dividends paid	12000
Total cash disbursements	$ 828,700	$ 828,700
Excess (deficiency) of cash available over disbursements		$(147,300)
Financing:
Borrowings		167300
Repayments		0
Interest		0
Total financing		167300
Ending cash balance		$   20,000