Problem - Schedules of Expected Cash Collections and Disbursements

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 $51,000.

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

                                October               November          December 

Cash sales                  $68,200                 $81,600                 $90,600  

 Sales on account        510,000                 603,000                 636,000   

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 $282,000 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 $170,500, all of which will be paid in December.

d. Selling and administrative expenses are budgeted at $471,000 for December. Of this amount, $61,100 is for depreciation.

e. A new web server for the Marketing Department costing $118,500 will be purchased for cash during December, and dividends totaling $18,000 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 financing section any borrowing that will be needed during the month.