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: The cash balance on December 1 is $53,400. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 77,000 $ 81,200 $ 87,800 Sales on account $ 435,000 $ 538,000 $ 644,000 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 $341,000 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 $165,000, all of which will be paid in December. Selling and administrative expenses are budgeted at $516,000 for December. Of this amount, $94,900 is for depreciation. A new web server for the Marketing Department costing $121,500 will be purchased for cash during December, and dividends totaling $13,000 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 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.
SOLUTION
1. Schedule of expected cash collections for December
Cash sales for the month of December | 87,800 | |
December sales collected in December | ($644,000 * 20%) | 128,800 |
November sales collected in December | ($538,000 * 60%) | 322,800 |
October sales collected in December | ($435,000 * 18%) | 78,300 |
Total | 617,700 |
2. Schedule of expected cash disbursements for merchandise purchases for December
Payment for December purchases | ($341,000 * 30%) | 102,300 |
Payment for November purchases | 165,000 | |
Total | 267,300 |
3. Cash budget for December
Cash balance as on December 1 | 53,400 | |
Add: Expected cash collections | 617,700 | |
Total cash available (A) | 671,100 | |
Less: Disbursements | ||
Payment for purchase of merchandise | 267,300 | |
Selling and administrative overheads ($516,000 - $94,900) | 421,100 | |
Purchase of new web server | 121,500 | |
Payment of dividends | 13,000 | |
Total cash disbursements (B) | 822,900 | |
Excess/ (Deficiency) of cash available over disbursements (A-B) | (151,800) | |
Financing: | ||
Borrowings | 171,800 | |
Repayments | 0 | |
Interest | 0 | |
Total financing | 171,800 | |
Cash balance, Ending | 20,000 |
You have been asked to prepare a December cash budget for Ashton Company, a distributor of...
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 $53.400 b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 77,000 $ 81,200 $ 87,800 $435,000 $538,000 $644,800 Sales on account are collected over a three-month period as follows: 20%...
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: The cash balance on December 1 is $40,000. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 65,000 $ 70,000 $ 83,000 Sales on account $ 400,000 $ 525,000 $ 600,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $42,000. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 80,600 $ 75,800 $ 100,200 Sales on account $ 505,000 $ 539,000 $ 612,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $41,200. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 75,400 $ 82,400 $ 97,200 Sales on account $ 490,000 $ 544,000 $ 629,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $41,000. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 68,400 $ 87,400 $ 95,800 Sales on account $ 415,000 $ 614,000 $ 692,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $45,400. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 67,800 $ 70,400 $ 93,000 Sales on account $ 465,000 $ 562,000 $ 614,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $45,600. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 76,000 $ 76,400 $ 90,800 Sales on account $ 450,000 $ 569,000 $ 604,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $57,600. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 65,600 $ 74,800 $ 83,200 Sales on account $ 480,000 $ 602,000 $ 671,000 Sales on account are collected over a three-month period as follows:...
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: The cash balance on December 1 is $41,000. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 68,400 $ 87,400 $ 95,800 Sales on account $ 415,000 $ 614,000 $ 692,000 Sales on account are collected over a three-month period as follows:...
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 will be $39,000. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 65,000 397,000 November $ 65,000 522,000 December $ 82,600 598,000 Sales on account are collected over a three-month period in the...