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 $41,600. b. Actual sales for October and November and expected sales for December are as follows: November December Cash sales Sales on account Octyber $ 81 200 $ 72,000 $ 96, 200 $ 495, 000 $ 512,000 $ 684, 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 $285.000 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 $185,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $455,000 for December. Of this amount, $89,600 is for depreciation. e. A new web server for the Marketing Department costing $79,000 will be purchased for cash during December, and dividends totaling $10,000 will be paid during the month. 1. 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.
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 $41,600. b. Actual sales for October and November and expected sales for December are as follows: November December Cash sales Sales on account Octyber $ 81 200 $ 72,000 $ 96, 200 $ 495, 000 $ 512,000 $ 684, 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 $285.000 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 $185,000, all of which will be paid in December. d. Selling and administrative expenses are budgeted at $455,000 for December. Of this amount, $89,600 is for depreciation. e. A new web server for the Marketing Department costing $79,000 will be purchased for cash during December, and dividends totaling $10,000 will be paid during the month. 1. 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.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter8: Budgeting
Section: Chapter Questions
Problem 17E
Related questions
Question
Need 1-3
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management, Concise Edi…
Finance
ISBN:
9781285065137
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College