Refer to the PrimeTime Sportswear data presented in Problem 14.13.

Required:

a. Prepare a cash budget for August and September. What are the prospects for this company if its sales growth continues at a similar rate?

b. Assume now that PrimeTime Sportswear is a mature firm, and that the July– September data represent a seasonal peak in business. Prepare a cash budget for October, November, and December, assuming that the income statements for November and December are the same as October’s. Explain how the cash budget would be used to support a request to a bank for a seasonal loan.

Data from problem 14.13

July August September October $84,000 $136,000 Sales $108,000 $118,000 Cost of goods sold: $ 28,800 $ 41,200 $ 43,800 $12,000 Beginning inventory 88,000 $116,800 Purchases 75,600 97,800 66,200 $87,600 $110,000 $139,000 Cost of goods available for sale Less: Ending inventory (40,000) (28,800) (41,200) (43,800) $ 75,600 $ 95,200 $ 70,000 Cost of goods sold $58,800 Gross profit $ 32,400 $ 40,800 $ 48,000 $25,200 Operating expenses 25,600 28,600 21,000 32,200 $ 4,200 $ 6,800 $ 12,200 $ 15,800 Operating income