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 $41,000. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 68,400 $ 87,400 $ 95, 800 $ 415,000 $ 614,000 $ 692,000 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 $376,000 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 $174,500, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $452,000 for December. Of this amount, $63,500 is for depreciation. e. A new web server for the Marketing Department costing $86,500 will be purchased for cash during December, and dividends totaling $10,500 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.

Answer 1

Answer Requirement 1 and 2

Total cash collections	$ 677,300
Total cash disbursements	$ 287300

Answer Requirement 3

Ashton Company
Cash Budget
For the Month of December
Beginning cash balance		41000
Add collections from customers		$ 677,300
Total cash available		$ 718,300
Less cash disbursements:
Payments to suppliers for inventory	$ 287,300
Selling and administrative expenses	388500
New web server	86500
Dividends paid	10500
Total cash disbursements	$ 772,800	$ 772,800
Excess (deficiency) of cash available over disbursements		$ (54,500)
Financing:
Borrowings		74500
Repayments		0
Interest		0
Total financing		74500
Ending cash balance		$   20,000

Detailed workings

Calculation of Cash Collection
Cash Sales	$              95,800
Sales On Account
For October Sales = 415000*18%	$              74,700
For November Sales = 614000*60%	$            368,400
For December Sales = 692000*20%	$            138,400
Total Cash Collections	$            677,300
Calculation of Total Cash Disbursements
For Purchase in December = $376000*30%	$            112,800
For November Accounts payable	$            174,500
Payment for Inventory purchase	$            287,300
Selling and administrative expenses	388500
New web server	86500
Dividends paid	10500
Total Cash disbursements	$            772,800

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