Problem 8-21 Schedules of Expected Cash Collections and Disbursements [LO8-2, LO8-4, LO8-8]

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 companys operations:

The cash balance on December 1 is $44,400.

Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	72,600	$	86,600	$	89,000
Sales on account	$	425,000	$	601,000	$	617,000

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.

Purchases of inventory will total $358,000 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 $207,000, all of which will be paid in December.

Selling and administrative expenses are budgeted at $459,000 for December. Of this amount, $64,500 is for depreciation.

A new web server for the Marketing Department costing $114,000 will be purchased for cash during December, and dividends totaling $9,500 will be paid during the month.

The company maintains a minimum cash balance of $20,000. An open line of credit is available from the companys bank to increase its cash balance as needed.

Required:

1. Calculate the expected cash collections for December.

2. Calculate the expected cash disbursements for merchandise purchases for December.

3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month.