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 $56,600. 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. Cash sales Sales on account October $ 71,200 440,000 November $ 73,400 576,000 December $ 86,200 639,000 c. Purchases of inventory will total $315,000 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 $181,500, all of which will be paid in December d. Selling and administrative expenses are budgeted at $522,000 for December. Of this amount. $74.100 is for depreciation. e. A new web server for the Marketing Department costing $103,500 will be purchased for cash during December, and dividends totalling $10,000 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 Schedule of Expected Cash Collections

Answer 1

1. Schedule of Expected cash collection for December : Particulars December Cash sales (Given) 86,200 Collections on account: - October sales (440,000 x 18%) 79,200 - November sales (576,000 x 60%) 345,600 - December sales (6.39.000 * 20%) 127,800 Total Cash collections 638, goo

& Cash Disbursements Shedule of Expected for December month Particulars Payment to supplies : November Purchase (Given) - December Purchases (315,000x 30%) 181,50 94,500 Total Cash Payments 276,000

Ashton Company Cash Budget If the month of Deeember 156, Goo Particulars Begining Cash Balance Add! Collections from Customers Above point o and 639.80o Total Cash available 695,400 Less! Cesh disbursements - Payment to supplies for Inventary & 76000 Cobave paid ) -selling sad onanistration Expenses 442900 ($5,22000 - $74, 100) New web graver 103,soo -Dividend paid locco petr Total Cash Disbursement ② Deficiency of cash (0-6) - financing Borrowing (win o) Repeyments Interest 837,400 (142000). 162,000 Total Financing 162,000 Total Ending Cash Balance 20,000

working Note :- 6 Here available cash balance after met of cash disbursement is deficiency of & 142.000 so Ashton Company has to borrow, And also compony's policy to maintain, minimum cash balance at end of monthis $20coo for this also company has to harrow. $162,000.. Therefore total borrowing amount is (142000+ 20.000) And Rapoyment and Interest will be following month. occuoron. 9 Depreciation is non cash item so such depreciation is reduced hom total selling & administration expenses. so, the balance of $447,900. is cash payment.