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: 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 PrimeTime 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 July $ 42,800 $ 5,960 37,800 $ 43,760 (14,810) $ 28,950 $ 13,850 10,800 $ 3,050 August $ 53,900 $ 14,810 44,200 $ 59,010 (20,830) $ 38,180 $ 15,720 13,000 $ 2,720 78% 22% Required: a. 1. Prepare a cash budget for August and September. 2. What are the prospects for this company if its sales growth continues at a similar rate? September $ 68,000 $ 20,830 49,100 $ 69,930 (22,360) $ 47,570 $ 20,430 14,600 $ 5,830 October $ 58,600 $ 22,360 33,500 $ 55,860 (20,220) $ 35,640 $ 22,960 16,600 $ 6,360 Cash on hand June 30 is estimated to be $40,240. Collections of June 30 accounts receivable were estimated to be $16,670 in Jul and $15,310 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $24,180. b. 1. Assume now that PrimeTime Sportswear is a mature firm, and that the July to 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. 2. Can the cash budget be used to support a request to a bank for a seasonal loan?
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: 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 PrimeTime 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 July $ 42,800 $ 5,960 37,800 $ 43,760 (14,810) $ 28,950 $ 13,850 10,800 $ 3,050 August $ 53,900 $ 14,810 44,200 $ 59,010 (20,830) $ 38,180 $ 15,720 13,000 $ 2,720 78% 22% Required: a. 1. Prepare a cash budget for August and September. 2. What are the prospects for this company if its sales growth continues at a similar rate? September $ 68,000 $ 20,830 49,100 $ 69,930 (22,360) $ 47,570 $ 20,430 14,600 $ 5,830 October $ 58,600 $ 22,360 33,500 $ 55,860 (20,220) $ 35,640 $ 22,960 16,600 $ 6,360 Cash on hand June 30 is estimated to be $40,240. Collections of June 30 accounts receivable were estimated to be $16,670 in Jul and $15,310 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $24,180. b. 1. Assume now that PrimeTime Sportswear is a mature firm, and that the July to 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. 2. Can the cash budget be used to support a request to a bank for a seasonal loan?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Please don't give image format and solve all required
Transcribed Image Text:Required A1 Required A2 Required B1 Required B2
What are the prospects for this company if its sales growth continues at a similar rate?
Prospects are
Show Transcribed Text
Required A1 Required A2 Required B1 Required B2
Assume now that PrimeTime Sportswear is a mature firm, and that the July to 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.
Note: Beginning cash should be indicated with a minus sign if it is a negative amount.
Beginning cash
Cash receipts:
August sales
September sales
October sales
November sales
otal cash receipts
Cash disbursements:
September purchases
October purchases
November purchases
December purchases
September operating expenses
October operating expenses
November operating expenses
December operating expenses
otal cash disbursements
Ending cash
Show Transcribed Text
October
$
$
$
November December
0 $
0 $
0 $
Required A1 Required A2 Required B1 Required B2
0 $
0 $
0 $
0
0
0
Can the cash budget be used to support a request to a bank for a seasonal loan?
Can the cash budget be used to support a request
to a bank for a seasonal loan?
Show less A
Transcribed Image Text: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: 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
PrimeTime 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
Show Transcribed Text
Required A1 Required A2 Required B1 Required B2
Beginning cash
Cash receipts:
June 30 accounts receivable
July sales
August sales
September sales
Total cash receipts
Cash disbursements:
July purchases
August purchases
September purchases
July operating expenses
August operating expenses
September operating expenses
Total cash disbursements
Ending cash
$
July
$ 42,800
Cash on hand June 30 is estimated to be $40,240. Collections of June 30 accounts receivable were estimated to be $16,670 in July
and $15,310 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $24,180.
Prepare a cash budget for August and September.
Note: Beginning cash should be indicated with a minus sign if it is a negative amount.
August
September
S
S
$ 5,960
37,800
$ 43,760
(14,810)
$ 28,950
$ 13,850
10,800
$ 3,050
Required:
a. 1. Prepare a cash budget for August and September.
2. What are the prospects for this company if its sales growth continues at a similar rate?
b. 1. Assume now that PrimeTime Sportswear is a mature firm, and that the July to 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.
2. Can the cash budget be used to support a request to a bank for a seasonal loan?
0 $
0 $
0 $
August
$ 53,900
$ 14,810
44,200
$ 59,010
(20,830)
$ 38,180
$ 15,720
13,000
$ 2,720
0
78%
22%
0
0
September
$ 68,000
$ 20,830
49,100
$ 69,930
(22,360)
$ 47,570
$ 20,430
14,600
$ 5,830
October
$ 58,600
$ 22,360
33,500
$ 55,860
(20,220)
$ 35,640
$ 22,960
16,600
$ 6,360
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