80.2K

Verified Solution

Link Copied!

Ashton Company, a distributor of exercise equipment, is preparing a cash budget for December. It provided the following information:

The cash balance on December $1$ is $$41,200.$

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

October November December

Cash sales $ $75,400$ $ $82,400$ $ $97,200$

Sales on account $ $490,000$ $ $544,000$ $ $629,000$

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.

Purchases of inventory will total $$366,000$ for December. Thirty percent of a month$$s inventory purchases are paid during the month of purchase. The accounts payable remaining from November$$s inventory purchases total $$183,000,$ all of which will be paid in December.

Selling and administrative expenses are budgeted at $$472,000$ for December. Of this amount, $$60,000$ is for depreciation.

A new web server for the Marketing Department costing $$96,000$ will be purchased for cash during December, and dividends totaling $$11,500$ will be paid during the month.

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:

Calculate the expected cash collections.

Calculate the expected cash disbursements for merchandise purchases.

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.

Answer & Explanation Solved by verified expert

See Answer