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(Solution) - PrimeTime Sportswear is a custom imprinter that began operations

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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 . . . . . . . . . . . . . . . . . . . . . . 70%
In the subsequent month. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%
PrimeTime Sportswear?s income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows:

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.
a. Prepare a cash budget for July.
b. What is your advice to management of PrimeTimeSportswear?


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This question was answered on: Jul 11, 2017

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