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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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:
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:
Cash sales
Sales on account
October
$78,200
$ 460,000
November
$ 77,600
$ 534,000
December
$ 95,000
$ 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
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
Transcribed Image Text: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: Cash sales Sales on account October $78,200 $ 460,000 November $ 77,600 $ 534,000 December $ 95,000 $ 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 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
Req 1 and 2. Required 3
1. Calculate the expected cash collections for December.
2. Calculate the expected cash disbursements for merchandise purchases for December.
Total cash collections
Cash disbursements for merchandise purchases
Show Transcribed Text
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Payments to suppliers for inventory
Selling and administrative expenses
New web server
Ashton Company
Cash Budget
For the Month of December
Dividends paid
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
Repayments
Interest
Total financing
Ending cash balance
Transcribed Image Text:Req 1 and 2. Required 3 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December. Total cash collections Cash disbursements for merchandise purchases Show Transcribed Text Beginning cash balance Add collections from customers Total cash available Less cash disbursements: Payments to suppliers for inventory Selling and administrative expenses New web server Ashton Company Cash Budget For the Month of December Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance
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