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 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 73% 27% PrimeTime Sportswear's Income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: September $ 42,400 October $ 54,000 November $ 67,7ee December $ 58,988 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 $ 6,350 38,600 $ 44,950 (14,950) $ 39, eee $ 12,400 10,980 $ 1,500 $ 14,950 44,400 $ 59, 350 (20,360) $ 38,990 $ 15,810 12,980 $ 2,119 $ 20,360 49,200 $ 69,560 (21,920) $ 47,640 $ 20,060 14,100 $ 5,960 $ 21,920 33,388 $ 55, 220 (19,820) $ 35,488 $ 23,500 15,90e $ 7,6ee Cash on hand August 31 is estimated to be $39.900. Collections of August 31 accounts receivable were estimated to be $17,320 In September and $14.760 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $24,320. Required: 0-1. 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

Answer 1

a-1:- Working Calculations:-

	September	October	November	December
Sales	42400	54000	67700	58900
Collections:-
50% in month of sale	21200	27000	33850	29450
45% in subsequent month	-	19080	24300	30465
Total Collections		46080	58150	59915
Purchases:-	38600	44400	49200	33300
Payments made:-
73% in the month of purchase	28178	32412	35916	24309
27% in subsequent month of purchase	-	10422	11988	13284
Total payments made in respect of purchase		42834	47904	37593
Operating Expenses:-
73% in the month of expenses	7957	9417	10293	11607
27% in subsequent month of expenses	-	2943	3483	3807
Total payments made in respect of expenses		12360	13776	15414
CASH BUDGET:-	September	October	November
Cash Receipts:-
Beginning Cash	39900	17965	23611
Collection of accounts receivable	17320	14760
Sales Collection	21200	46080	58150
TOTAL A	78420	78805	81761
Cash Disbursements:-
Accounts payable & accrued expenses	24320
Purchase payments made	28178	42834	47904
Expenses	7957	12360	13776
TOTAL B	60455	55194	61680
Closing Cash (A-B)	17965	23611	20081

a-2 :- prospects of the company are good

b-1:-

	November	December	January	February
Sales		58900	58900	58900
Collections:-
50% in month of sale		29450	29450	29450
45% in subsequent month		30465	26505	26505
Total Collections		59915	55955	55955
Purchases:-		33300	33300	33300
Payments made:-
73% in the month of purchase		24309	24309	24309
27% in subsequent month of purchase		13284	8991	8991
Total payments made in respect of purchase		37593	33300	33300
Operating Expenses:-		15900	15900	15900
73% in the month of expenses		11607	11607	11607
27% in subsequent month of expenses		3807	4293	4293
Total payments made in respect of expenses		15414	15900	15900
CASH BUDGET:-
Cash Receipts:-
Beginning Cash		20081	26989	33744
Collection of accounts receivable
Sales Collection		59915	55955	55955
TOTAL A		79996	82944	89699
Cash Disbursements:-
Accounts payable & accrued expenses
Purchase payments made		37593	33300	33300
Expenses		15414	15900	15900
TOTAL B		53007	49200	49200
Closing Cash (A-B)		26989	33744	40499