Question 2 ch 9

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 $50,600.

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

	October				November				December
Cash sales	$	74,400			$	86,000			$	85,000
Sales on account		515,000				533,000				672,000

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 $317,000 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 $190,000, all of which will be paid in December.

Selling and administrative expenses are budgeted at $526,000 for December. Of this amount, $58,600 is for depreciation.

A new web server for the Marketing Department costing $78,000 will be purchased for cash during December, and dividends totaling $15,500 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 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 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.

Payments to suppliers for inventory

Selling and administrative expenses

New web server

Dividends paid

Total cash disbursements 0

Excess (deficiency) of cash available over disbursements 0

Financing:

Borrowings

Repayments

Interest

Total financing 0

Ending cash balance $0