Problem 821 Schedules of Expected Cash Collections and Disbu

Problem 8-21 Schedules of Expected Cash Collections and Disbursements [LO8-2, LO8-4, LO8-8] 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 $45,400 b. Actual sales for October and November and expected sales for December are as follows Cash sales Sales on account October November December $ 67,80070,400 $ 93,000 $ 465,000 562,000 $ 614,000 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 $356,000 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 $164,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $431,000 for December. Of this amount, $54,200 is for depreciation. e. A new web server for the Marketing Department costing $120,500 will be purchased for cash during December, and dividends totaling $13,500 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 1. Calculate the expected cash collections for December. 2. Calculate the expected cash disbursements for merchandise purchases for December Total cash collections Total cash disbursements

Solution

3) Cash budget Beginning cash balance 45,400 Add collections from customers 636,700 total cash available 682,100 less cash disbrsements payments to suppliers for inventory 270,800 Selling and administrative expenses 376,800 New web server 120,500 dividends paid 13,500 total cash disbursements 781,600 Excess(deficiency) of cash available over disbursement -99,500 Financing: Borrowings 119,500 Repayments interest total financing 119,500 Ending cash balance 20,000