Paperclip Office Supply€™s March 31, 2016, balance sheet follows:

The budget committee of Paperclip Office Supply has assembled the following data:
a. Sales in April are expected to be $60,000. Paperclip forecasts that monthly sales will increase 2% over April sales in May. June€™s sales will increase by 4% over April sales. July sales will increase 20% over April sales. Cash receipts are 80% in the month of the sale and 20% in the month following the sale.
b. Paperclip maintains inventory of $7,000 plus 25% of the cost of goods sold budgeted for the following month. Cost of goods sold equal 50% of sales revenue. Purchases are paid 30% in the month of the purchase and 70% in the month following the purchase.
c. Monthly salaries amount to $4,000. Sales commissions equal 5% of sales for that month. Salaries and commissions are paid 60% in the month incurred and 40% in the following month.
d. Other monthly expenses are as follows:
€¢ Rent: $2,800, paid as incurred
€¢ Depreciation: $700
€¢ Insurance: $400, expiration of prepaid amount
€¢ Income tax: $1,900, paid as incurred
Requirements
1. Prepare Paperclip€™s sales budget for April and May 2016. Round all amounts to the nearest dollar.
2. Prepare Paperclip€™s inventory, purchases, and cost of goods sold budget for April and May.
3. Prepare Paperclip€™s selling and administrative expense budget for April and May.

Transcribed Image Text:

PAPERCLIP OFFICE SUPPLY Balance Sheet March 31, 2016 Assets Current Assets: Cash Accounts Receivable Merchandise Inventory Prepaid Insurance Total Current Assets 4 34,000 20,000 14,500 2,400 $ 70,900 Property, Plant, and Equipment: Equipment and Fixtures Less: Accumulated Depreciation 56,000 (26,000) 30,000 Total Assets 100,900 Liabilities Current Liabilities: Accounts Payable Salaries and Commissions Payable $ 13,000 3,600 Total Liabilities 16,600 Stockholders' Equity Common Stock, no par Retained Earnings 12,000 72,300 Total Stockholders' Equity Total Liabilities and Stockholders Equity 84,300 S 100,900