Problem 8-21 Schedules of Expected Cash Collections and Disbursements (LoB-2 Lo8
ID: 2543380 • Letter: P
Question
Problem 8-21 Schedules of Expected Cash Collections and Disbursements (LoB-2 Lo8-4,L08-8) You have been aske information is available about the company's operations d to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following 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: s 78,200 77,680 95,000 $ 460,000 534,000 606,000 Sales on account ales on account are collected over a three-month period as follows: 20% collected inthe 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 increase its cash balance as needed. Required 1. Calculate the expected cash collections for December 2. Calculate the 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. Complete this question by entering your answers in the tabs below Req 1 and 2 Req 3Explanation / Answer
Req 1 Total cash collection
December cash sales = 95000
Collection on accounts :
December [20% * 606000] =121200
November [60% *534000] = 320400
October [18% * 460000] = 82800
= $619400
Req 2 Total cash disbursement
November's accounts payable = 209000
December purchase [352000 * 30%] = 105600
= $314600
Req 3 Cash budget
Beginning cash balance = 46000
Add: Collection from Customers = $619400
Total cash available = 665400
less: Cash disbursements :
payment to supplier for inventory = $314600
Selling and administrative expense
[505000 - 60700 depreciation] = 444300
New web server = 102000
Dividend = 16500
Total cash disbursement = 877400
Excess (Deficiency ) of cash available over disbursement = (212000)
Finaning:
Borrowings = 232000
Repayments = 0
Interest = 0
Total financing = 232000
Ending cash balance = $20000