Question $1$

You have been asked to prepare a cash budget for Ashton company, a distributor of exercise

equipment. The following information is available about the company's operations:

a$.$ The cash balance on December $1$ will be $$40,000.$

b$.$ Actual sales for October and November and expected sales for December are as

follows:

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 uncollectible.

c$.$ Purchases of inventory will total $$280,000$ for December. Thirty percent of a month's

inventory purchases are paid during the month of the purchase with the balance being

paid the following month. The accounts payable remaining from November's inventory

purchases total $$161,000,$ all of which will be paid in December.

d$.$ Selling and administrative expenses are budgeted at $$430,000$ for December. Of this

amount, $$50,000$ is for depreciation.

e$.$

f$.$ A new web server for the Marketing Department costing $$76,000$ will be purchased for

cash during December, and dividends totaling $$9,000$ will be paid during the month.

g$.$ 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:

Prepare a schedule of expected cash collections for December.

Prepare a schedule of expected cash disbursements for materials during December to

suppliers for inventory purchases.

Prepare a cash budget for December. Indicate in the financing section any

borrowing$/$repayment that will be needed during the month.