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Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information: The cash balance on December 1
Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information:
The cash balance on December is $
Actual sales for October and November and expected sales for December are as follows:
October November December
Cash sales $ $ $
Sales on account $ $ $
Sales on account are collected over a threemonth period as follows: collected in the month of sale, collected in the month following sale, and collected in the second month following sale. The remaining are uncollectible.
Purchases of inventory will total $ for December. Thirty percent of a months inventory purchases are paid during the month of purchase. The accounts payable remaining from Novembers inventory purchases total $ all of which will be paid in December.
Selling and administrative expenses are budgeted at $ for December. Of this amount, $ is for depreciation.
A new web server for the Marketing Department costing $ will be purchased for cash during December, and dividends totaling $ will be paid during the month.
The company maintains a minimum cash balance of $ An open line of credit is available from the companys bank to increase its cash balance as needed.
Required:
For December:
Calculate the expected cash collections.
Calculate the expected cash disbursements for merchandise purchases.
Prepare a cash budget. Indicate in the financing section any borrowing needed during the month. Assume any interest will not be paid until the following month.
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