Question

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 company’s operations:

a.	The cash balance on December 1 is $46,000.
b.	Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	78,200	$	77,600	$	95,000
Sales on account		460,000		534,000		606,000

   

	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 $352,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $209,000, all of which will be paid in December.
d.	Selling and administrative expenses are budgeted at $505,000 for December. Of this amount, $60,700 is for depreciation.
e.	A new web server for the Marketing Department costing $102,000 will be purchased for cash during December, and dividends totaling $16,500 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 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.

  

  

Answer 1