Question
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
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: 51% in the month after the sale is made and 46% 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 | 80 | % |
In the subsequent month | 20 | % |
PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows:
September | October | November | December | ||||||||||||
Sales | $ | 42,300 | $ | 53,600 | $ | 67,900 | $ | 59,000 | |||||||
Cost of goods sold: | |||||||||||||||
Beginning inventory | $ | 5,760 | $ | 14,300 | $ | 20,810 | $ | 22,320 | |||||||
Purchases | 38,000 | 44,300 | 48,800 | 33,100 | |||||||||||
Cost of goods available for sale | $ | 43,760 | $ | 58,600 | $ | 69,610 | $ | 55,420 | |||||||
Less: Ending inventory | (14,300 | ) | (20,810 | ) | (22,320 | ) | (19,980 | ) | |||||||
Cost of goods sold | $ | 29,460 | $ | 37,790 | $ | 47,290 | $ | 35,440 | |||||||
Gross profit | $ | 12,840 | $ | 15,810 | $ | 20,610 | $ | 23,560 | |||||||
Operating expenses | 10,500 | 12,800 | 14,700 | 15,900 | |||||||||||
Operating income | $ | 2,340 | $ | 3,010 | $ | 5,910 | $ | 7,660 | |||||||
Cash on hand August 31 is estimated to be $40,040. Collections of August 31 accounts receivable were estimated to be $19,570 in September and $15,380 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $23,990.
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.)
b-1. Assume now that PrimeTime Sportswear is a mature firm, and that the SeptemberNovember 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.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started