PrimeTime Sportswear is a custom imprinter that began operations six months ago. Sales have exceeded management's most optimistic projections. Sales are made on account and collected as follows: 60% in the month after the sale is made and 35% in the second month after sale. Merchandise purchases and operating expenses are paid as follows:

In the month during which the merchandise

is purchased or the cost is incurred . . . . . . . . . . . . . . . . . . . . . . 70%

In the subsequent month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows:

Cash on hand June 30 is estimated to be $75,000. Collections of June 30 accounts receivable were estimated to be $40,000 in July and $30,000 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $48,000.
Required:
a. Prepare a cash budget for July.
b. What is your advice to management of PrimeTimeSportswear?

September October $136,000 $118,000 August $84,000 $108,000 Cost of goods sold: Beginning inventory $12,000 28,800 $ 41,200 43,800 75,600 97,800 $87,600 $116,800 $139,000 $110,000 28,800(41.200(43,800) [40,000) $95.200 70,000 40,800 48,000 32,200 $ 12,200 15,800 Cost of goods available for sale Less: Ending inventory Cost of goods sold $58,800 75,600 $25,200 32,400 25,600 4,200 6,800 Operating expenses 21,000 28,600 Operating income