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 $56,600. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 71,200 $ 440,000 November $ 73,400 December $ 86,200 $ 576,000 $ 639,000 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 $315,000 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 $181,500, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $522,000 for December. Of this amount, $74,100 is for depreciation. e. A new web server for the Marketing Department costing $103,500 will be purchased for cash during December, and dividends totaling $10,000 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 that any interest will not be paid until the following month. Complete this question by entering your answers in the tabs below. Req 1 and 2 Required 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. Ashton Company Cash Budget Beginning cash balance Add collections from customers Total cash available For the Month of December $ 56,600 56,600 Less cash disbursements: Payments to suppliers for inventory $ 276,000 Selling and administrative expenses New web server Dividends paid 447,900 103,500 10,000 Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings 837,400 (780,800) Repayments Interest Total financing Ending cash balance 0 $ (780,800)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
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 $56,600.
b. Actual sales for October and November and expected sales for December are as follows:
Cash sales
Sales on account
October
$ 71,200
$ 440,000
November
$ 73,400
December
$ 86,200
$ 576,000
$ 639,000
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 $315,000 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 $181,500, all of which will be paid in
December.
d. Selling and administrative expenses are budgeted at $522,000 for December. Of this amount, $74,100 is for depreciation.
e. A new web server for the Marketing Department costing $103,500 will be purchased for cash during December, and dividends
totaling $10,000 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
that any interest will not be paid until the following month.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Required 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.
Ashton Company
Cash Budget
Beginning cash balance
Add collections from customers
Total cash available
For the Month of December
$ 56,600
56,600
Less cash disbursements:
Payments to suppliers for inventory
$ 276,000
Selling and administrative expenses
New web server
Dividends paid
447,900
103,500
10,000
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings
837,400
(780,800)
Repayments
Interest
Total financing
Ending cash balance
0
$ (780,800)
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 $56,600. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 71,200 $ 440,000 November $ 73,400 December $ 86,200 $ 576,000 $ 639,000 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 $315,000 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 $181,500, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $522,000 for December. Of this amount, $74,100 is for depreciation. e. A new web server for the Marketing Department costing $103,500 will be purchased for cash during December, and dividends totaling $10,000 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 that any interest will not be paid until the following month. Complete this question by entering your answers in the tabs below. Req 1 and 2 Required 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. Ashton Company Cash Budget Beginning cash balance Add collections from customers Total cash available For the Month of December $ 56,600 56,600 Less cash disbursements: Payments to suppliers for inventory $ 276,000 Selling and administrative expenses New web server Dividends paid 447,900 103,500 10,000 Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings 837,400 (780,800) Repayments Interest Total financing Ending cash balance 0 $ (780,800)
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education