Problem 8-21 Schedules of Expected Cash Collections and Disbursements [LO8-2, LO
ID: 2558681 • Letter: P
Question
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: 25 a. The cash balance on December 1 is $56,600. b. Actual sales for October and November and expected sales for December are as follows Print Cash sales Sales on account October November December $ 71,20e 73,400 $ 86, 200 440,000 576,900 639,900 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 rerm aining 2% is uncollectible. c. Purchases of inventory will total $315,000 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 $181,500, all of which will be paid in d. Selling and administrative expenses are budgeted at $522,000 for December. Of this amount, $74,100 is for depreciation new web server for the Marketing Department costing $103,500 will be purchased for cash during Decembe totaling $10,000 will be paid during the month. r, and dividends 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.Explanation / Answer
1. Expected Cash collection For December Cash Sales for December 86,200 Cash collection for December Sales=20%* 639000 1,27,800 Cash collection for October Sales=18%* 440000 79,200 Cash collection for November Sales=60%* 576000 3,45,600 Expected Cash collection For December 6,38,800 2. Expected Cash Disbursement dor merchandise purchased For December Cash paid for December Inventory =30%* 315000 94,500 Cash paid for November Inventory 1,81,500 Expected Cash Disbursement dor merchandise purchased For December 2,76,000 3. Cash Budget for December Beginning Cash Balance 56600 Add: Collection from customers 6,38,800 Total Cash Available 6,95,400 Less: Cash Disbursement Payment to suplliers for inventory 2,76,000.00 Selling & Administrative expenses 4,47,900.00 New Web server 1,03,500.00 Dividends paid 10,000.00 Total cash disbursement 8,37,400 Excess( deficiency) of cash available over disbursements -1,42,000 Financing 0 Borrowings 1,62,000 Interest 0 Total Financing 1,62,000 Ending Cash Balance 20,000