Question
Arlington Manufacturing needs to prepare a cash budget for December 2019. The cash balance at the beginning of December is $14,000. The actual sales for
Arlington Manufacturing needs to prepare a cash budget for December 2019. The cash balance at the beginning of December is $14,000. The actual sales for October and November and expected sales for December are:
Information | October ($) | November ($) | December ($) |
Cash Sales | 13,000 | 14,500 | 22,800 |
Sales on Account | 50,000 | 60,000 | 85,000 |
Total Sales | 63,000 | 74,500 | 107,800 |
Sales on account are collected over a three-month period in the following ratio:
15% in the month of sale,
65% in the month following sale
17% in the second month following sale
3% remaining are uncollectible.
Additional information includes:
(a) Purchases of inventory will total $50,000 for December; 15% will be paid for in December. Accounts payable from Novembers inventory purchases is $32,000, all of which will be paid in December.
(b) Selling and administrative expenses are budgeted at $24,000 for December; of which $8,000 is for depreciation.
(c) Equipment costing $35,000 will be purchased for cash during December, and other miscellaneous cash expenses of $5,000 will be paid during December.
Required
Prepare a schedule showing the cash collections from sales on account for the month of December and also a Cash Budget for December. Show all working clearly
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