Question

value 10.00 points 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 $40,000 b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 65,000 $ 70,000 $ 83,000 400,000 525,000 600,000 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. c. Purchases of inventory will total $280.000 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 $161,000, all of which will be paid in December d. Selling and administrative expenses are budgeted at $430,000 for December. Of this amount. $50.000 is for depreciation. e. A new web server for the Marketing Department costing $76,000 will be purchased for cash during December, and dividends totaling $9,000 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 Ashton Company Schedule of Expected Cash Collections December cash sales Collections on account: October sales November sales December sales Total cash collections

Answer 1

Solutions D schedule of Eurected cash collections for December Ashton company of Espected cash Schedule collections Amount ($) $83,000 December cash sales collections on account October sales ($400,000 x 18%). November sales ($525,0001 601) December salesl* 600.000X20) Tobal Gash Collections $72,000 $315.000 $ 120,000 $590,000

2) schedule of expected cash disbursements merchandise purchase for December for Ashton Company Schedule of Eupected cash Bisbursements Amount (!) payments to suppliers: November purchases $ 161,000 December purchases $ 84,000 $280,000x30) Total cash payments $245,000

3) Cash Budget for December Amount (6) $ 40ibo $ 590,000 $636,000 se Ashton Company Cash Budget For the month of December . Amount (6) Beginning cash balance Add's Collections from Eustomers (computed in Requirement I) . Total Cash available Less: Cash Disbursements; ... payments to supplier for de $ 205,000 inventory (computed above) Selling and Administrative $380.000 expenses ($1301000 - $50,000) New web server $ 16,000 Dividends pald $ 9,000 Total cash disbursements. Esccess (Deficiency) of cash available over Disbursements Financing: . . BOXYDwings.. $100.000 Repayments Interest . . : Total Financing Enging cash balance $ 710,000) $ 80,000) $100,000 $20,000 Note : 1) Borrowings of $100.000 is made for the month of December; because the company must have to maintain mininum Cash balance of $20,000.

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