pare a schedule of expected cash collections for December.Prepare a schedule of expected cash disbursements for merchandise purchases for December.

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732 viewsOctober 18, 2016

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Darshita 6.14K October 18, 2016 0 Comments

ou 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 $45,600.
b.	Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	76,000	$	76,400	$	90,800
Sales on account		450,000		569,000		604,000

	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 $288,000 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 $162,500, all of which will be paid in December.
d.	Selling and administrative expenses are budgeted at $495,000 for December. Of this amount, $88,800 is for depreciation.
e.	A new web server for the Marketing Department costing $83,500 will be purchased for cash during December, and dividends totaling $17,000 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 bolster the cash position as needed.

Required:
1.	Prepare a schedule of expected cash collections for December.

2.	Prepare a schedule of 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.

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score 0 · Answer 1 · 2016-10-18T11:27:36+00:00

Oct	Nov	Dec
Cash Sales	76000	76400	90800
Sales On Account	450000	569000	604000

Cash collections for December
December cash sales	90800
Cash collections from Oct. sales on account	81000	450000*18%
Cash collections from Nov. sales on account	341400	569000*60%
Cash collections from Dec. sales on account	120800	604000*20%
Total Cash Collection	634000

Answer : Total Cash Collection in the month of December= $ 634000

2

Prepare a schedule of expected cash disbursements for merchandise purchases for December.

expected cash disbursements for merchandise purchases for December
Purchases of inventory in december in will total	288000
30% of december paid in december
288000*.30	86400
November purchase paid in december	162500
Total = 86400+162500	248900

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.

Cash Budget For December
Particular	Amount in $
Opeaning Cash Balnce	45600
Cash collections for December
December cash sales	90800
Cash collections from Oct. sales on account	81000
Cash collections from Nov. sales on account	341400
Cash collections from Dec. sales on account	120800
Total Cash Collection	634000
Net Cash = (A)	679600
Less:
Cash Paid
On Inventory
Inventory of december	86400
November purchase paid in december	162500
Selling and Admin Exp =495000-88800	406200
Server Purchase	83500
Devidend Paid	17000
Cash Ouflow (B)	755600
Cash Balance before borrowing	-76000
Desired Cash Balce required	20,000
Cash Borrowed	-96,000

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