Nabilah Khansa Luthfiyah-1911000089

PROBLEM 9–17 Schedules of Expected Cash Collections and Disbursements [LO2, LO4, LO8]

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 $40,000.

b. Actual sales for October and November and expected sales for December are as follows:

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 $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.
d. Selling and administrative expenses are budgeted at $430,000 for December. Of this amount,
$50,000 is for depreciation.
e. 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.
f. The company maintains a minimum cash balance of $20,000. An open line of credit is available
from the company’s bank to bolster the cash position as needed.

Required:

1. Prepare a schedule of expected cash collections for December.

2. Prepare a schedule of expected cash disbursements for merchandise purchases for
December.
3. Prepare a cash budget for December. Indicate in the fi`1nancing section any borrowing that
will be needed during the month. Assume that any interest will not be paid until the
following month

SOLUTION

1. December cash sales $83,000

Collections on account:
October sales: $400,000 x 18% 72,000
November sales: $525,000 x 60% 315,000
December sales: $600,000 x 20% 120,000
Total cash collections $590,000

2. Payment to suppliers:
November purchases (account payable) $161,000
December purchases: $280,000 x 30% 84,000
Total cash payments $245,000

Ashton Company
Cash Budget
Nabilah Khansa Luthfiyah-1911000089

For the Month of December

3. Cash balance, beginning $40,000
Add cash receipts: Collections from customers 590,000
Total cash available before current financing 630,000
Less disbursements:
Payments to suppliers for inventory $245,000
Selling and administrative expenses 380,000
($430,000-%50,000 = $380,000
New web server 76,000
Dividends paid 9,000
Total disbursements 710,000
Excess (deficiency) of cash available over disbursements (80,000)
Financing:
Borrowings 100,000
Repayments 0
Interest 0
Total financing 100,000
Cash balance, ending $20,000