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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: 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 74% 26% PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows: September $ 42,000 October $ 53,600 November $ 67,600 December $ 58,888 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 $ 6,380 37.400 $ 43,780 (14,170) $ 29,610 $ 12,390 19,900 $ 1,490 $ 14,170 43,899 $ 57,970 (20, 140) $ 37,830 $ 15,770 12,700 $ 3,070 $ 20,140 48,500 $ 68,640 (21,980) $ 46,660 $ 20,940 14,790 $ 6,240 $ 21,980 33,200 $ 55,180 (19,860) $ 35, 320 $ 23,480 16,500 $ 6,980 Cash on hand August 31 is estimated to be $40.410. Collections of August 31 accounts receivable were estimated to be $17.370 in September and $15,500 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $23,580. Required: 4-1. Prepare a cash budget for October and November. (Beginning cash should be Indicated with a minus sign If It Is a negative amount.) October November S 0 S 0 Beginning cash Cash receipts: August 31 accounts receivable September sales October sales November sales Total cash receipts Cash disbursements: September purchases October purchases November purchases September operating expenses October operating expenses November operating expenses Total cash disbursements Ending cash 0 S 0 S 0 S 0 4-2. What are the prospects for this company if its sales growth continues at a similar rate? O Prospects are good O Prospects are not good b-1. Assume now that PrimeTime Sportswear is a mature firm, and that the September-November data represent a seasonal peak in business. Prepare a cash budget for December, January, and February, assuming that the income statements for January and February are the same as December's. (Beginning cash should be Indicated with a minus sign If It Is a negative amount.) December January February S 0$ 0 S 0 Beginning cash Cash receipts: October sales November sales December sales January sales Total cash receipts Cash disbursements: November purchases December purchases January purchases February purchases November operating expenses December operating expenses January operating expenses February operating expenses Total cash disbursements Ending cash S 0 S 0 S 0 S 0 S 0 S 0 b-2. Can the cash budget be used to support a request to a bank for a seasonal loan? Yes O No

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