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:

1. The cash balance on December 1 is $51,000.

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

	October		November		December
Cash sales	$	68,200	$	81,600	$	90,600
Sales on account	$	510,000	$	603,000	$	636,000

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.

3. Purchases of inventory will total $282,000 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 $170,500, all of which will be paid in December.

4. Selling and administrative expenses are budgeted at $471,000 for December. Of this amount, $61,100 is for depreciation.

5. A new web server for the Marketing Department costing $118,500 will be purchased for cash during December, and dividends totaling $18,000 will be paid during the month.

6. 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.

Req 1 and 2 Reg 3 1. Calculate the expected cash collections for December 2. Calculate the expected cash disbursements for merchandise purchases for December. Total cash collections Total cash disbursements Req 1 and2 Req 3 Calculate the expected cash disbursements for merchandise purchases for December. 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