Question

Managerial accounting

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 $43,200. b. Actual sales for October and November and expected sales for December are shown below. 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. Cash sales Sales on account October $ 76,200 520,000 November $ 70, 800 527,000 December $ 84, 400 649,000 c. Purchases of inventory will total $370,000 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 $193,000, all of which will be paid in December d. Selling and administrative expenses are budgeted at $433,000 for December. Of this amount, $99,800 is for depreciation. e. A new web server for the Marketing Department costing $78,500 will be purchased for cash during December, and dividends totalling $18,500 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 bolster the cash position as needed.

Answer 1

Schedule of expected cash disbursements
Payment to suppliers:
November purchases		$ 193,000.00
December purchases		$ 111,000.00	($ 370000 x 30%)
Total cash payments		$ 304,000.00

	Cash Budget
	Beginning cash balance				$   43,200.00
Add:	Collection from customers				$ 624,000.00
	Total cash available				$ 667,200.00
Less:	Cash disbursements
	Payment to suppliers for inventory				$ 304,000.00
	Selling and adm. Expenses				$ 333,200.00
	New web server				$   78,500.00
	Dividends paid				$   18,500.00
	Total cash disbursements				$ 734,200.00
	Excess/ (deficiency)				$ (67,000.00)
	Financing:
	Borrowings				$   87,000.00
	Repayments				$                 -
	Interest				$                 -
	Total financing				$   87,000.00
	Ending cash balance				$   20,000.00

Is it okay now?