You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise
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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 companys operations:
The cash balance on December is $
Actual sales for October and November and expected sales for December are as follows:
October November December
Cash sales $ $ $
Sales on account $ $ $
Sales on account are collected over a threemonth period as follows: collected in the month of sale, collected in the month following sale, and collected in the second month following sale. The remaining is uncollectible.
Purchases of inventory will total $ for December. Thirty percent of a months inventory purchases are paid during the month of purchase. The accounts payable remaining from Novembers inventory purchases total $ all of which will be paid in December.
Selling and administrative expenses are budgeted at $ for December. Of this amount, $ is for depreciation.
A new web server for the Marketing Department costing $ will be purchased for cash during December, and dividends totaling $ will be paid during the month.
The company maintains a minimum cash balance of $ An open line of credit is available from the companys bank to increase its cash balance as needed.
Required:
Calculate the expected cash collections for December.
Calculate the expected cash disbursements for merchandise purchases for December.
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.
Related Book For
Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby
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