Question 5

Problem 8-21 (Algo) Schedules of Expected Cash Collections and Disbursements [LOB-2, LOB-4, LOB-B] 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 com pany's operations: a. The cash balance on December'i is $51,400. b. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales 5: 71,500 $ 30,200 $ 33,600 Sales on account 3- 120,000 3- 530,000 $ 652,000 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. c. Purchases of inventory will total $287,000 for December. Thirty percent ofa month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $160,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $501,000 for December. Of this amount, $92,300 is for depreciation. e. A new web server for the Marketing Department costing $113,500 will be purchased for cash during December, and dividends totaling $10,000 will be paid during the month. f. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's 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