Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 25

Cash budget-part 1 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:

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 August 31 is estimated to be $40,000. Collections of August 31 accounts receivable were estimated to be $20,000 in September and $15,000 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $24,000.
Required:
a. Prepare a cash budget for September.
b. What is your advice to management of PrimeTime Sportswear?