$***$round all calculations to the nearest dollar$***$

Crimson Inc. Budget Exercise $1$:$15$ Class Only $($Section $3398)$

Crimson Inc. sells Sporting Goods. The following is the trial balance for Crimson Inc. as of

$9/30/2025.$

$12$

Cash $ $41,545$

Accounts receivable $46,000$

Inventory $45,000$

Store equipment $250,000$

Accumulated depreciation $ $88,000$

Accounts payable $35,000$

Salaries payable $29,000$

Utilities payable $2,300$

Common stock $137,000$

Retained earnings $91,245$

Total $ $382,545$ $ $382,545$

$*$ Budgeted sales for October total $$140,000,$ consisting of $$40,000$ cash and $$100,000$ on credit.

$*$ The company expects sales to increase by $6\%$ each month.

$*$ The mix of cash v$.$ credit sales is not expected to change from month to month.

$*$ HALF of the credit sales are collected in the following month. The remaining sales are collected $2$

months later.

$*$ $$23,000$ of the AR at $9/30$ was collected in October, the remaining amount was collected in

November.

Prepare a sales budget and schedule of cash receipts for October, November, and December.

Sales Budget: October November December Total

Cash Sales

Credit Sales

Total

Cash Receipts October November December Total

Cash Sales $ $40,000$

Credit Sales $23,000$

Total $ $326,344$

What is total revenue for the fourth quarter $($Q$4)?$

What is the accounts receivable balance at $12/31/2025?$

$*$ Cost of goods sold for October is expected to be $$60,000.$

$*$ Cost of goods sold is expected to increase by $10\%$ each month.

$*$ The company needs to maintain a minimum ending inventory balance equal to $15\%$ of the

current month's cost of goods sold.

$*$ All inventory is purchased on account. $60\%$ of the accounts payable is paid in the month that the

purchase occurs; the remaining amount owed is paid the next month.

Prepare a monthly purchases budget and schedule of cash payments for Q$4.$

Purchases Budget October November December Total

Projected cost of sales

Plus: Desired ending inventory

Total Needed

Less: Beginning inventory

Required purchases

Cash Payments for Purchases October November December

Cash paid for current month

Cash paid for prior month AP

Total $ $170,054$

What is budgeted COGS for Q$4?$

What is the budgeted ending inventory at $12/31/2025?$

What is the budgeted accounts payable balance at $12/31/2025?$

Prepare a monthly selling and administrative expenses budget for the $4$th quarter.

$*$ Utilities and salaries are paid in the month following $($after$)$ the one in which the expense is

incurred.

$*$October rent expense was paid in October. In November $$8,000$ rent was prepaid for November and

December rent. $($No additional rent was paid in December.$)$

$*$ Other expenses are paid in cash in the month in which they are incurred.

$*$ Assume sales commissions, supplies expense, and utilities increase $6\%$ each month. All other costs

are fixed $($do not change$).$

S&A Budget October November December Total

Sales commissions $ $5,500$

Office supplies expense $1,200$

Utilities expense $2,438$

Depreciation expense $2,100$

Salary expense $29,000$

Rent expense $4,000$

Advertising expenses $900$

Total operating expenses $ $45,138$

S&A Cash Payments Budget October November December Total

Sales commissions

Supplies paid

Utilities paid

Depreciation on equipment

Salaries paid

Rent paid

Advertising paid

Total

What is total depreciation expense for Q$4?$

What is the ending accum. depreciation at $12/31/2025?$

What is total budgeted S&A expenses for Q$4?$

What is total cash paid for S&A for Q$4?$

What is utilities payable at $12/31/2025?$

What is salaries payable at $12/31/2025?$

Fill in the missing blanks on the Pro Forma Statements below. No dividends were declared.

Crimson Inc.

Pro Forma Income Statement

Quarter ended $12/31/2025$

Sales revenue

COGS

Gross margin

Operating expenses

Net Income

Crimson Inc.

Pro Forma Balance Sheet

$12/31/2025$

Assets:

Cash $67,483$

Accounts receivable

Inventory

Store equipment $250,000$

Accumulated depreciation

Net book value of equipment

Total assets

Liabilities:

Accounts payable $29,436$

Utilities payable

Salaries payable

Stockholders' Equity:

Common stock

Retained earnings $201,257$

Total liabilities & equity $399,433$

Beg RE

$+$Net Income

$-$Dividends

$=$Ending RE

What was total stockholders' equity at $12/31/2025?$

Was the company profitable during the fourth quarter of $2025?$

What was total budgeted total current assets at $12/31/2025?$

What was total budgeted total current liabilities at $12/31/2025?$

CASH BUDGET October November December

Beginning Cash $ $41,545$

Cash Receipts

Total Cash Available

Less cash payments for purchases

Less cash payments for S&A expenses

Ending Cash $ $67,483$

Should the company borrow money for October?