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
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
You have been asked to prepare a December
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The cash balance on December 1 is $55,400.
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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.
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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.
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Selling and administrative expenses are budgeted at $510,000 for December. Of this amount, $55,100 is for
depreciation. -
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.
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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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