Required: 1. Calculate the expected cash collections for December. Total cash collections?? 2. Calculate the expected cash disbursements for merchandise purchases for December. cash disbursements for merchandise purchases?? 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. beginning cash balance? add collections from customers ?? toatal cash available?? less cash disbursements?? payments to suppliers for inventory?? selling and administrative expenses?? new web server?? dividends paid?? toatl cash disbursements  excess deficiency of cash available over disbursements  financing: borrowings?? repayments ?? interest?? total financing  ending cash balance

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:

 

  1. The cash balance on December 1 is $55,400.

  2. Actual sales for October and November and expected sales for December are as follows:

 

  October November December
Cash sales $ 69,400 $ 88,400 $ 96,800
Sales on account $ 445,000 $ 596,000 $ 625,000
 

 

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.

  1. Purchases of inventory will total $340,000 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 $173,500, all of which will be paid in December.

  2. Selling and administrative expenses are budgeted at $510,000 for December. Of this amount, $55,100 is for depreciation.

  3. A new web server for the Marketing Department costing $83,000 will be purchased for cash during December, and dividends totaling $18,500 will be paid during the month.

  4. 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.

Total cash collections??

2. Calculate the expected cash disbursements for merchandise purchases for December.

cash disbursements for merchandise purchases??

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.

beginning cash balance?

add collections from customers ??

toatal cash available??

less cash disbursements??

payments to suppliers for inventory??

selling and administrative expenses??

new web server??

dividends paid??

toatl cash disbursements 

excess deficiency of cash available over disbursements 

financing:

borrowings??

repayments ??

interest??

total financing 

ending cash balance

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