You have been asked to prepare a December cash budget for AB Company, a distributor of exercise equipment following information is available about the companys operations:

1. The cash balance on December 01, $40,000.
2. Actual sales for October and November and expected sales for December are as follows:

	October	November	December
Cash Sales	$65,000	$70,000	$83,000
Sales on Account	$4,00,000	$5,25,000	$6,00,000

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 uncollectable.

1. Purchases of inventory will total $2,80,000 for December. Thirty percent of months inventory purchases are paid during the month of purchase. The accounts payable remaining from Novembers inventory purchases total $1,61,000, all of which will be paid in December.
2. Selling and administrative expenses are budgeted at $4,30,000 for December. Of this amount, $50,000 is for depreciation.
3. A new web server for marketing department costing $76,000 will be purchased for cash during December, and dividends totaling $9,000 will be paid during December also.
4. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the companys bank to strengthen the cash position as needed.

Requirements:

i1. Prepare a schedule of expected cash collections for December.[2 Marks]

i2. Prepare a schedule of expected cash disbursements for merchandise purchases for December.[2 Marks]

i3. Prepare cash budget for December. Indicate the financing section and borrowing that will be needed during the month. Assume that any interest will be paid until the following month[6 Marks].

i4.The principal purpose of the cash budget is to see how much cash the company will have in the bank at the end of the year. Do you agree?