Question

1. CASH BUDGET – Chapter 8

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 $52,000. The company requires a minimum cash balance of $20,000.
	Actual sales for October and November and expected sales for December are as follows:

Sales (all on credit)          October $650,000 November $775,000 December $890,000

Collections for Sales are as follows: 20% in the month of sale 75% in the month following the sale 5% is uncollectible Compute the cash collections for December:

1. The following is budgeted for December.

Inventory purchases $359,000 paid in the month of purchase

New web server $92,000 cash purchase

Selling and administrative expense (includes $85,000 depreciation) $520,000

Cash Dividends $15,500

The company can borrow any amount of money in any increment to meet their cash balance requirement.

Prepare a December Cash Budget

Answer 1

Schedule of Expected Cash Collections
Particulars			December
Collection for the month of:
November	($ 775000 x 75%)		$ 581,250.00
December	($ 890000 x 20%)		$ 178,000.00
Total collections			$ 759,250.00

	Cash Budget
	Particulars
	Beginning cash balance			$    52,000.00
Add:	Collections			$ 759,250.00
	Total Collections			$ 811,250.00
Less:	Disbursements
	Payment to suppliers			$(359,000.00)
	Selling and Adm. Expenses			$(435,000.00)
	New Web Server			$   (92,000.00)
	Dividends Paid			$   (15,500.00)
	Total Disbursements			$(901,500.00)
	Excess/ (Deficiency) of Cash			$   (90,250.00)
	Financing:
	Borrowings			$ 110,250.00
	Repayments			$                   -
	Interest			$                   -
	Total Financing			$ 110,250.00
	Ending Cash Balance			$    20,000.00