Problem 14-20 Cash budget-part 2 LO 4,8 PrimeTime Sportswear is a custom imprint
ID: 2529621 • Letter: P
Question
Problem 14-20 Cash budget-part 2 LO 4,8 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: 52% in the month after the sale is made and 47% 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: September October November December Sales Cost of goods sold $42,600 53,800 67,900 S 59,500 $ 5,540 14,730 $20,980 21,920 33,200 $44,240 58,730 69,880 55,120 20,120 Beginning inventory 38,700 44,000 48,900 Cost of goods available for sale Less: Ending inventory Cost of goods sold 14,730 29,510 20,980 21,920 37.(50 $ 47,960 $35,000 Gross profit Operating expenses $ 13,090 $ 16,050 $19,940 24,500 16,200 $ 2,1903,550 $ 5,440 8,300 10,900 12,500 14,500 Operating income Cash on hand August 31 is estimated to be $39,820. Collections of August 31 accounts receivable were estimated to be $19,520 in September and $14,540 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $24,320Explanation / Answer
Requirement a-1 PrimeTime Sportswear Cash Budget for October & November September October November Beginning balance 39820 -196 -18003 Cash Receipts August 31, Accounts Receivable 19520 14540 September Sales 22152 20022 October Sales 27976 November Sales 0 Total Cash Receipts 19520 36692 47998 Cash Disbursements September purchases 27477 11223 October purchases 31240 12760 November Purchases 34719 September operating expenses 7739 3161 October operating expenses 8875 3625 November operating expenses 10295 August 31, Accounts Payable 24320 Total Cash Disbursements 59536 54499 61399 Ending Cash -196 -18003 -31404 Requirement a-2 If sales growth continues at similer growth, prospect for the company is not good. Requirement b-1 Cash Budget for December, January & February December January February Beginning balance -31404 -24270 -10817 Cash Receipts November 30, Accounts Receivable 60594 31913 December Sales 30940 27965 January Sales 30940 February Sales 0 Total Cash Receipts 60594 62853 58905 Cash Disbursements November purchases 14181 December purchases 23572 9628 January purchases 23572 9628 February purchases 23572 November operating expenses 4205 December operating expenses 11502 4698 January operating expenses 11502 4698 February operating expenses 11502 Total Cash Disbursements 53460 49400 49400 Ending Cash -24270 -10817 -1312