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

Requirement 1 and 2:

Total cash collections	$677,300
Total cash disbursements	$287,300

Calculations:

Total cash collections
	Credit sales	%	October	November	December
Cash sales			$68,400	$87,400	$95,800
Collections from customers:
October sales	$415,000
Collected in October		20%	$83,000
Collected in November		60%		$249,000
Collected in December		18%			$74,700
November sales	$614,000
Collected in November		20%		$122,800
Collected in December		60%			$368,400
December sales	$692,000
Collected in December		20%			$138,400
Total			$151,400	$459,200	$677,300

Total cash disbursements for merchandise purchase
Payment of accounts payable	$174,500
Payment for December purchases (376,000 x 30%)	$112,800
Total	$287,300

Requirement 3:

Ashton Company
Cash budget
For the month of December
Beginning cash balance		$41,000
Add: Collections from customers		$677,300
Total cash available (i)		$718,300
Less: Cash disbursements
Payment to suppliers for inventory	$287,300
Selling and administrative expense (452,000-63,500 Dep.)	$388,500
New web servier	$86,500
Dividends paid	$10,500
Total cash disbursements (ii)		$772,800
Excess (deficiency) of cash available over disbursements (i) - (ii)		($54,500)
Financing:
Borrowing		$74,500
Repayment
Interest
Total financing
Ending cash balance		$20,000