Question

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The town information is available about the company's operations: a. The cash balance on December 1 is $47.000. b. Actual sales for October and November and expected sales for December are as follows: bok Cash sales Sales on account October November December $ 83,000 $ 79,000 $ 85,600 $ 500,000 $ 624,000 $ 674,000 int Sales on account are collected over a three-month period as follows: 20% collected in the month or sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible ences c. Purchases of inventory will total $372,000 for December. Thirty percent of a month's inventory purchases are paid during the mon of purchase. The accounts payable remaining from November's inventory purchases total $189.500, all of which will be paid in December d. Selling and administrative expenses are budgeted at $502,000 for December of this amount $69,000 is for depreciation e. 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. 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 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 in the tabs below.

only point 1

Answer 1

Answer with working notes is given below

Ashton Company 1 Cash Collections from customers October Sales November Sales December Sales Total cash collections from customers December $90,000 ($500,000 * 18%) $374,400 ($624,000 * 60%) $134,800 ($674,000 * 20%) $599,200 A 2 Cash Disbursement to Vendors November month December month Total payment to vendors December $189,500 $111,600 ($372,000 * 30%) $301,100 $47,000 $85,600 $599,200 $731,800A Ashton Company Cash Budget for the month of December Beginning Cash Balance Cash Sales Cash collection from customers Total Cash available Less: Cash disbursements Payment to suppliers for inventory Selling and administration expenses New Web Server Dividends paid Total Cash disbursements $301,100 $433,000 ($502,000-$69,000) $88,500 $14,500 $837,100 B -$105,300 A-B $125,300 Excess or Deficiency of cash over disbursements Financing Borrowings Repayments Interest Total Financing Ending Cash Balance $125,300 $20,000

2 Beech Corporation Sales Budget July $340,000 August $360,000 September Quarter $350,000 $1,050,000 Budgeted Sales (value) Expected Cash Collection August July $144,000 $119,000 June Month-Opening balance July Month (35% month of sale balance 65% next month) August Month (35% month of sale balance 65% next month) September Month (35% month of sale balance 65% next month) Total Collection from Customers $221,000 $126,000 September Quarter $144,000 $340,000 $234,000 $360,000 $122,500 $122,500 $356,500 $966,500 $263,000 $347,000 3 Silver Company Sales Budget April $410,000 May $610,000 June Quarter $210,000 $1,230,000 Budgeted Sales (value) Expected Cash Collection May April $51,000 $222,000 $102,500 February Sales March Sales April Sales May Sales June Sales Total Collection from Customers $55,500 $246,000 $152,500 June Quarter $51,000 $277,500 $61,500 $410,000 $366,000 $518,500 $52,500 $52,500 $480,000 $1,309,500 $375,500 $454,000 Accounts Receivable Balance as on June 30th $249,000 May Sales June Sales Total $91,500 ($610,000*15%) $157,500 ($210,000*75%) $249,000