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:
The cash balance on December 1 is $40,000.
Actual sales for October and November and expected sales for December are as follows:
|Sales on account||$||400,000||$||525,000||$||600,000|
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.
Purchases of inventory will total $280,000 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 $161,000, all of which will be paid in December.
Selling and administrative expenses are budgeted at $430,000 for December. Of this amount, $50,000 is for depreciation.
A new web server for the Marketing Department costing $76,000 will be purchased for cash during December, and dividends totaling $9,000 will be paid during the month.
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.
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.
1. The cash collections in December is as follows
|December Cash sales||83,000|
|Cash from October Credit Sales||72000||400000*18%|
|Cash from November Credit Sales||315000||525000*60%|
|Cash from December credit Sales||120000||600000*20%|
|Total Cash collection||590,000|
2. Cash disbursal for merchandise purchase
|Cash for November purchases||161000|
|Cash for December purchases||84,000||=280000*30%|
3.Since, depreciation is a non-case expense, it has been excluded from selling and distribution
Cash budget for December $
|Add Cash collections||590,000|
|Add. Loan from banks(balancing figure)||100,000|
|Cash disbursal for merchadise purchase||-245,000|
|Selling and Administartive expense||-380,000|
|Investiment in web server||-76,000|
Our solutions are written by experts, many with advanced degrees, and available 24/7See Solution
Q: Walt Bach Company has accumulated the following budget data for the year 2019. Sales: 40000 units, ...
A: Cost of goods sold alludes to the immediate costs inferable from the generation of the goods sold in...
Q: FB Manufacturing Company is a partnership among Yolando Gonzalez, Willies Todd, and Linda Walkers. T...
A: Partnership: A partnership is that type of business in which two or more person share loss and profi...
Q: You must show all of your work for each problem. Make sure your workflows logically and solutions ar...
A: Bad debt reserves are used by the business to write off any bad debt expenses arising in the course ...
Q: With the following questions, why is 'n' value backwards? #1: Wiseman Video plans to make four annua...
A: Annual Deposit: Annual deposit refers to the amount deposited annually in a fund or for a specific p...
Q: Identify the following expenditures as capital expenditures or revenue expenditures. Immediately af...
A: Expenditures: The useful life of the plant assets signifies the time period, that the company estima...
Q: Early 2014, H industries was forms with authorization to issue 250,000 share of $10 par value common...
A: Stock holder’s equity: This section of the balance sheet shows the total balance in the stock holder...
Q: Larkspur, Inc.currently has 720,000 shares of common stock outstanding. Larkspur, Inc. is considerin...
A: By issuing stock, the company will have no interest expenses from bond. The number of outstanding sh...
Q: Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year ...
A: Calculate the sales price per unit.
Q: I attempted this problem and got some of the missing values but my numbers aren't adding up. Can you...
A: Manufacturing Income Statement: It refers to the income statement of a manufacturing business it inc...
Sorry about that. What wasn’t helpful?