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: 49% in the month after the sale is made and 44% 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 71% 29% PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: Septonbar $ 41,500 October $53,508 November $ 68,400 December $ 59,380 Sales Cost of goods sold: Beginning inventory Purchases Cost of roads available for sale Less: Ending inventory Cost of goods sold Gross profit Operating expenses Operating income $5,838 37,700 $43,730 (11,100) $ 29,630 $ 11,870 18, $1.070 $ 14,100 44,100 $ 58,566 (20,420) $ 38, ase $ 15,72e 13,220 $ 2,420 $ 28,428 49,000 $ 69,428 (22,470) $ 46,950 $ 21,45 14,90 $ 6,55 $ 22,470 32,700 3 $ 55,172 (19,790) $ 35,380 $ 22,928 15,6 57,320 Cash on hand August 31 is estimated to be $39,830 Collections of August 31 accounts receivable were estimated to be $18 200 in September and $14.550 in October Payments of August 31 accounts payable and accrued expenses in September were estimated to be $23720 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.) October November S 0 $ 0 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 0 S S 0 $ 0 $ 0 a-2. What are the prospects for this company if its sales growth continues at a similar rate? O Prospects are not good O Prospects are good b-1. Assume now that PrimeTime 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.) December January February Beginning cash Cash receipts. October sales November sales $ 0 $ 0 $ 0 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 0 $ $ 0 $ 0 0 $ $ ols 0 $ 0 0 b-2. Can the cash budget be used to support a request to a bank for a seasonal loan? Yes O No
