Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information: a. The cash balance on December 1 is $47,600. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 78,800 $ 405,000 November $ 74,400 $ 615,000 December $ 89,600 $ 628,000 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% are uncollectible. c. Purchases of inventory will total $351,000 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 $194,500, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $512,000 for December. Of this amount, $81,400 is for depreciation. e. A new web server for the Marketing Department costing $104,000 will be purchased for cash during December, and dividends totaling $11,500 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 increase its cash balance as needed. Required: For December: 1. Calculate the expected cash collections. 2. Calculate the expected cash disbursements for merchandise purchases. 3. Prepare a cash budget. Indicate in the financing section any borrowing needed during the month. Assume any interest will not be paid until the following month. Complete this question by entering your answers in the tabs below. Required 1 and 2 Required 3
Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information: a. The cash balance on December 1 is $47,600. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 78,800 $ 405,000 November $ 74,400 $ 615,000 December $ 89,600 $ 628,000 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% are uncollectible. c. Purchases of inventory will total $351,000 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 $194,500, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $512,000 for December. Of this amount, $81,400 is for depreciation. e. A new web server for the Marketing Department costing $104,000 will be purchased for cash during December, and dividends totaling $11,500 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 increase its cash balance as needed. Required: For December: 1. Calculate the expected cash collections. 2. Calculate the expected cash disbursements for merchandise purchases. 3. Prepare a cash budget. Indicate in the financing section any borrowing needed during the month. Assume any interest will not be paid until the following month. Complete this question by entering your answers in the tabs below. Required 1 and 2 Required 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information:
a. The cash balance on December 1 is $47,600.
b. Actual sales for October and November and expected sales for December are as follows:
Cash sales
Sales on account
October
$ 78,800
$ 405,000
November
$ 74,400
$ 615,000
December
$ 89,600
$ 628,000
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% are uncollectible.
c. Purchases of inventory will total $351,000 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 $194,500, all of which will be paid in
December.
d. Selling and administrative expenses are budgeted at $512,000 for December. Of this amount, $81,400 is for depreciation.
e. A new web server for the Marketing Department costing $104,000 will be purchased for cash during December, and dividends
totaling $11,500 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
increase its cash balance as needed.
Required:
For December:
1. Calculate the expected cash collections.
2. Calculate the expected cash disbursements for merchandise purchases.
3. Prepare a cash budget. Indicate in the financing section any borrowing needed during the month. Assume any interest will not be
paid until the following month.
Complete this question by entering your answers in the tabs below.
Required 1
and 2
Required 3
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