Homework Help is Here – Start Your Trial Now!
Business
Accounting
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?

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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
icon
Concept explainers
Question
None
Problem 14-22 (Static) Cash budget-part 2 LO 14-4, 14-7 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: 60% in the month after the sale is made and 35% 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 70% 30% PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: Sales July $ 84,000 August $ 108,000 September $ 136,000 October $ 118,000 Cost of goods sold: Beginning inventory Purchases $ 12,000 $ 28,800 88,000 Cost of goods available for sale $ 87,600 (28,800) Less: Ending inventory Cost of goods sold Operating expenses Gross profit Operating income 75,600 $ 58,800 $ 25,200 21,000 $ 4,200 $ 116,800 (41,200) $ 75,600 $ 32,400 25,600 $ 41,200 97,800 $ 139,000 (43,800) $ 95,200 $ 40,800 28,600 $ 6,800 $ 12,200 $ 43,800 66,200 $ 110,000 (40,000) $ 70,000 $ 48,000 32,200 $ 15,800 Cash on hand June 30 is estimated to be $75,000. Collections of June 30 accounts receivable were estimated to be $40,000 in July and $30,000 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $48,000. 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? Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Problem 14-22 (Static) Cash budget-part 2 LO 14-4, 14-7 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: 60% in the month after the sale is made and 35% 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 70% 30% PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: Sales July $ 84,000 August $ 108,000 September $ 136,000 October $ 118,000 Cost of goods sold: Beginning inventory Purchases $ 12,000 $ 28,800 88,000 Cost of goods available for sale $ 87,600 (28,800) Less: Ending inventory Cost of goods sold Operating expenses Gross profit Operating income 75,600 $ 58,800 $ 25,200 21,000 $ 4,200 $ 116,800 (41,200) $ 75,600 $ 32,400 25,600 $ 41,200 97,800 $ 139,000 (43,800) $ 95,200 $ 40,800 28,600 $ 6,800 $ 12,200 $ 43,800 66,200 $ 110,000 (40,000) $ 70,000 $ 48,000 32,200 $ 15,800 Cash on hand June 30 is estimated to be $75,000. Collections of June 30 accounts receivable were estimated to be $40,000 in July and $30,000 in August. Payments of June 30 accounts payable and accrued expenses in July were estimated to be $48,000. 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? Complete this question by entering your answers in the tabs below.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 4 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS