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 $58,600 Actual sales for October and November and expected sales for December are as follows October November December Cash sales $ 73,200 $ 78,000 $ 92,000 Sales on account $ 485,000 $ 568,000 $ 663,000 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 $316,000 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 $162,000, all of which will be paid in December Selling and administrative expenses are budgeted at $514,000 for December Of this amount, $52,000 is for depreciation A new web server for the Marketing Department costing $117,500 will be purchased for cash during December, and dividends totaling $12,500 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 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

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 13, 2024

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

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 $58,600.
Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	73,200	$	78,000	$	92,000
Sales on account	$	485,000	$	568,000	$	663,000

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 $316,000 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 $162,000, all of which will be paid in December.
Selling and administrative expenses are budgeted at $514,000 for December. Of this amount, $52,000 is for depreciation.
A new web server for the Marketing Department costing $117,500 will be purchased for cash during December, and dividends totaling $12,500 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 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.