E11-7 Time allowed: 25 minutes 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: 1 The cash balance on 1 December will be 40,000. 2 Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October 65,000 400.000 November 70,000 525,000 December 83,000 600.000 3 Sales on account are collected over a three-month period in the following ratio: 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 uncollectable. Purchases of inventory will total 280,000 for December and 30% 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 4 Selling and administrative expenses are budgeted at $420,000 for December. Of this amount, 50,000 is for depreciation. 5 6 A new web server for the Marketing Department costing 76,000 will be purchased for cash during December, and dividends totalling 9,000 will be paid during the month. The company must maintain 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. 2 Prepare a schedule of expected cash disbursements during December to suppliers for materials for Inventory purchases. 3 Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month.