Problem 8-19 Schedules of Expected Cash Collections and Disbursements You have b
ID: 2446991 • Letter: P
Question
Problem 8-19 Schedules of Expected Cash Collections and Disbursements
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 $46,000.
b. Actual sales for October and November and expected sales for December are as follows: October November December Cash sales $ 78,200 $ 77,600 $ 95,000 Sales on account 460,000 534,000 606,000 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 $352,000 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 $209,000, all of which will be paid in December.
d. Selling and administrative expenses are budgeted at $505,000 for December. Of this amount, $60,700 is for depreciation.
e. A new web server for the Marketing Department costing $102,000 will be purchased for cash during December, and dividends totaling $16,500 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.
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.
Explanation / Answer
(1) Preparation of a schedule of expected cash collections for December.We have,
Ashton Company
Schedule of expected cash collection for December.
(2) Preparation of a schedule of expected cash disbursements for merchandise purchases for December.We have,
Ashton Company
Schedule of expected cash disbursements for merchandise purchases for December.
(3) Preparation of the cash budget for December.We have,
Ashton Company
Cash budget for December
Particulars December(Amount in $) Cash Sale 95,000 Collection of sales on account: For the month of December 606,000 x 20% 121,200 For the month of November 534,000 x 60% 320,400 For the month of October 460,000 x 18% 82,800 Total cash collection for the month of December $ 619,200