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:

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 $47,000.
b.	Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	83,000	$	79,000	$	85,600
Sales on account		500,000		624,000		674,000

  

	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 $372,000 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 $189,500, all of which will be paid in December.
d.	Selling and administrative expenses are budgeted at $502,000 for December. Of this amount, $69,000 is for depreciation.
e.	A new web server for the Marketing Department costing $88,500 will be purchased for cash during December, and dividends totaling $14,500 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 bolster the cash position as needed.

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

Explanation:

1.

October sales: $500,000 × 18% = $90,000

November sales: $624,000 × 60% = $374,400

December sales: $674,000 × 20% = $134,800

   
2.

December purchases: $372,000 × 30% = $111,600

 
3.

Selling and administrative expenses: $502,000 – $69,000 = $433,000