Prime Time 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: 50% in the month after the sale is made and 45% in the second month after sale. Merchandise purchases and operating expenses are paid as follows: In the month during

  
 

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Prime Time 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: 50% in the month after the sale is made and 45% 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 In the subsequent month Prime Time Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: Sales Cost of goods sold: Beginning inventory Purchases Cost of goods available for sale Less: Ending inventory Cost of goods sold Gross profit Operating expenses Operating income September $ 42,000 $ 6,000 37,800 $43,800 (14,400) $ 29,400 $ 12,600 10,500 $ 2,100 October $ 54,000 $ 14,400 44,000 $ 58,400 (20,600) $ 37,800 $ 16,200 12,800 $ 3,400 November $ 68,000 $ 20,600 48,900 $ 69,500 (21,900) $ 47,600 75% 25% $ 20,400 14,300 $ 6,100 December $ 59,000 $ 21,900 33,100 $ 55,000 (20,000) $ 35,000 $ 24,000 16,100 $ 7,900 Cash on hand August 31 is estimated to be $40,000. Collections of August 31 accounts receivable were estimated to be $20,000 in September and $15,000 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $24,000. Required: a-1. Prepare a cash budget for October and November. (Beginning cash should be indicated with a minus sign if it is a negative amount.) Beginning cash Cash receipts: August 31 accounts receivable September sales October sales November sales Total cash receipts Cash disbursements: September purchases October purchases November purchases September operating expenses October operating expenses November operating expenses Total cash disbursements Ending cash October November a-2. What are the prospects for this company if its sales growth continues at a similar rate? Prospects are good Prospects are not good b-1. Assume now that Prime Time Sportswear is a mature firm, and that the September-November data represent a seasonal peak in business. Prepare a cash budget for December, January, and February, assuming that the income statements for January and February are the same as December's. (Beginning cash should be indicated with a minus sign if it is a negative amount.) Beginning cash Cash receipts: October sales November sales December sales January sales Total cash receipts Cash disbursements: November purchases December purchases January purchases February purchases November operating expenses December operating expenses January operating expenses February operating expenses Total cash disbursements Ending cash December January February

Expert Answer

Answer a-1 Cash budget for September,October and November September October November Beginning Cash View the full answer