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 $41,200.

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

	October		November		December
Cash sales	$	75,400	$	82,400	$	97,200
Sales on account	$	490,000	$	544,000	$	629,000

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 $366,000 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 $183,000, all of which will be paid in December.

Selling and administrative expenses are budgeted at $472,000 for December. Of this amount, $60,000 is for depreciation.

A new web server for the Marketing Department costing $96,000 will be purchased for cash during December, and dividends totaling $11,500 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.

Total cash collections
Total cash disbursements

Ashton Company
Cash Budget
For the Month of December
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Payments to suppliers for inventory
Selling and administrative expenses
New web server
Dividends paid
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance