P22-22A Thumbtack’s March 31, 2012, budgeted balance sheet follows:

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P22-22A Preparing an operating budget [30 min]

Thumbtack’s March 31, 2012, budgeted balance sheet follows:

Current assets:		Current liabilities:
Cash	$18,000	Accounts payable	$12,500
Accounts receivable	12,000	Salary and commissions payable	1,400
Inventory	16,000	Total liabilities	$13,900
Prepaid insurance	2,200
Total current assets	$48,200	Stockholders’ Equity
Plant assets:		Common stock	16,000
Equipment and fixtures	45,000	Retained earnings	33,300
Less: Accumulated depreciation	30,000	Total stockholders’ equity	$49,300
Total plant assets	$15,000
Total assets	$63,200	Total liabilities and stockholders’ equity	$63,200

The budget committee of Thumbtack Office Supply has assembled the following data.

Sales in April were $40,000. You forecast that monthly sales will increase 2% over April’s sales in
May. June’s sales will increase 4% over April’s sales. July’s sales will increase 20% over April’s sales.
Collections are 80% in the month of sale and 20% in the month following sale.
Thumbtack maintains inventory of $11,000 plus 25% of the COGS budgeted for the following
month. COGS = 50% of sales revenue. Purchases are paid 30% in the month of purchase and 70%
in the month following the purchase.
Monthly salaries amount to $7,000. Sales commissions equal 5% of sales for that month. Salaries
and commissions are paid 30% in the month incurred and 70% in the following month.
Other monthly expenses are as follows:

Rent expense
Depreciation expense
Insurance expense
Income tax
$2,400, paid as incurred
$200
$100, expiration of prepaid amount
20% of operating income, paid as incurred

Requirements
1. Prepare Thumbtack’s sales budget for April and May, 2012. Round all amounts
to the nearest $1.

2. Prepare Thumbtack’s inventory, purchases, and cost of goods sold budget for
April and May.

3. Prepare Thumbtack’s operating expenses budget for April and May.

4. Prepare Thumbtack’s budgeted income statement for April and May.