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 $44,400. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October $ 72,600 $ 425,000 November $ 86,600 $ 601,000 December $ 89,000 $ 617,000 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 $358,000 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 $207,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $459,000 for December. Of this amount, $64,500 is for depreciation. e. A new web server for the Marketing Department costing $114,000 will be purchased for cash during December, and dividends totaling $9,500 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Step by step
Solved in 5 steps