 Hello in this presentation we're going to work some test type problems smaller type problems that could be in a multiple-toys type format so we're going to start off here with this problem. Note that a longer type of problem like this might be useful to actually read the last sentence first might save some time so we know what it's going to ask for at the end and then when we read through it it's good to just plot down those numbers that we can then use at a later point so first a word from our sponsor yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways like our crunchy numbers is my cardio product line now i'm not saying that subscribing to this channel crunchy numbers with us will make you thin fit and healthy or anything however it does seem like it worked for her just saying so yeah subscribe hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com we're going to say that to maintain a 10 000 i'm reading this last sentence to maintain the 10 000 required balance during june the company must do what so we can see we're talking about a bank account i see a bank account here we want to retain a ten thousand dollar balance so it sounds like we need to basically measure the activity in the bank account so as we read through it i'm going to list out kind of the data and punch that into excel so we may be able to record that information so company so i'm going to read it from the top now company is prepared a cash budget for june cash budget for june the company has 11 300 cash at the beginning so i'm just going to say our beginning cash and i'm just going to say beginning balance we're talking about the cash accounts we'll just say the beginning started off with 11 300 11 300 and anticipates 30 000 7 in cash receipts so i'm just going to say all right receipts we think we're going to pull in another 30 700 cash receipts and 30 that 35 900 in disbursements so we're going to have to pay out this is a budget of course disbursements and receipts we're estimating i'm just going to abbreviate we're going to say 35 i'll make it i'll make it a negative negative 35 900 and you'll note that i i underline that with the underline here already that cells been underlined okay and see what else we have the company has has an agreement with the bank to maintain a minimum balance i'm just going to note that over here minimum balance we want a minimum balance in our checking account of 10 000 that's like our cushion we don't want to go below that we're told our bank hey if we go below 10 then give us an automatic loan because we need 10 in there at any given time in case of emergency we currently have a loan to the bank of uh may 31st 15 000 all right so i'm just going to note that on the side so now we need to read that last sentence again to maintain the 10 000 required balance during june the company must do what well let's see where we are at the ending balance as of now we said that we i'm just going to sum these up we had a beginning balance of 11 3 plus receipts of 37 that's what we think's going to happen at least in disbursements of 35 9 so we sum that up equals the sum of i'm going to say this plus this minus this that's the sum of these last one being a negative number we say enter we get the 6001 of course all we did was in a calculator say 11 3 plus 30 7 minus the 35 9 gives us the 61 now we see that that is below 10 000 right that's below 10 000 that's our minimum about so we need a minimum of 10 000 so what's the bank going to do it's going to increase our loan then so i'm going to underline this and i'm going to say we need then a loan equalling 10 000 minus what's currently in there the 61 that means we need another three nights so what's going to happen what's going to be you know in the answers when we look at a multiple choice question we're going to have to get a loan we got to increase the loan for this 39 what's that going to do to our total loan because the current loan balance happens to be this 15 so that will increase our balance to it's going to increase it by the 39 and we currently have a balance of 15 so the answer key could say we need to increase the loan by 39 the answer key another type of variation of this problem might say that well what's going to be the loan balance after this month is over and that would be 18 9 all right we have the next one here once again i'm going to try to read that last line and see if i can get some information before reading the entire thing so the last line here says starting here compute the projected sales expense to be recorded on the selling expense budget for the manager for the month ended june 30th so we're going to keep that in mind as we read through it i'm going to start from the top now company sales a product for 700 dollars so unit price is going to be 700 i'll just log that in units sales for may so we're going to say may i'm going to put a header here may and we'll say unit sales unit sales for may are going to be 400 and we just know we already know that we have this unit price so i'm going to put that down here and i'm going to say okay well the unit price is going to be down here and you could retype this in i know i'm formatting and formatting is half the half the issue whether you do it by hand or in excel so we're going to put it and try to put it in this kind of grid type format so we're going to say all right well unit sales are here the unit price is here so that's what we have for may so far 400 and sales are expected to increase the prior year months by 3 percent so we know that we're looking for if we look in the answer we're looking for june so we have may here and then we have june so we need to think about okay well what's going to happen to june then based on this is that's what we want to go i'm going to format paint this and go here and we know that the unit sales are going to increase by 3 a couple ways we can calculate that we're going to say that unit sales are 400 so for may unit sales we have 400 and it's going to increase by 3 percent so we could say okay well the increase is going to be 3 percent i'm going to put 0.03 and i'm going to go back on that cell we're going to go to the home tab alignment and just remember if i add decimals 3 percent is 0.03 if we move this we move the decimal over or we can make it a percent 3 percent and then if we multiply that out we're going to say all right well the increase then is 4 000 times 3 percent it's going to increase by 12 so the increase is going to be by 12 so this is the increase i'll say increase percent and this is actually the actual increase in dollars and that's going to be the 12 so note that we might do that a bit more quickly by saying all right well if it's 400 and it's going to increase by 3 percent instead of putting 3 percent we might just put 100 percent plus 3 percent is 1.03 so note we could do this a lot in one calculation this is worth noting by saying 1.03 103 percent of the original number means that it's going to go to 412 you know rather than taking this 412 and saying what's the new sales going to be 400 plus 12 we could do that with one calculation by saying 400 times 1.03 103 percent that'll give us that 412 so if i did that over over here again what we're doing is we're saying i'm taking this 400 times 1.03 103 percent 1.03 that gives us the 412 times the 700 unit price so so we don't really need to calculate may but if we wanted to we can say okay may is 400 units times 700 per unit enter that comes out to 280 sales and then june is going to go up to 412 units times 700 per unit and that gives us the 288 4 now what we're looking for this is the sales and what we're looking for is the the selling expenses so they they're telling us that the selling expenses is 3 percent of sales we have commission commission rate is going to be 3 percent so once again that's point or 2 percent sorry it's 2 percent 0.02 so i'm going to go back on there on that 0.02 i'm going to go to the home tab we're going to go to the numbers group and again i could increase the decimals 0.02 is the same as if i say the percent sign 2 percent and that means that the commission will be the sales of 288 4 times 2 percent times 0.02 in the calculator and that'll give us the commission of this 5768 we also pay a salary so we have a salary a sales salary to the sales manager of 3000 therefore the total sales then would be uh the selling expense would be the commission 5768 plus the salary that we pay them and that will give us the 8768 for the selling expenses so note that the problem the main issue with this type of problem is to basically format the the information put it down in a format that works obviously in excel it's nice because you can move things around if you don't have excel then you need to get used to how to format different types of problems so you can do it efficiently by hand it would be the same type of thing graph like this but you want to be able to efficiently do that by hand all right next one here once again i'm going to try to start off by reading that last line first to see if we can get some information on what needs to be done before we read through the entire thing so the last line begins right here with budgeted purchases of product a for the year would be so we need to find out what what the budgeted purchases of a will be so keep that in mind as we read through the entire thing here starting from the top we have the sales budget for corp shows twenty thousand two hundred units of product a and twenty thousand two hundred units of product b are going to be sold for prices of ten dollars and twenty cents and twelve dollars and twenty cents respectively the desired ending inventory of product a is thirty percent higher than its beginning inventory of two thousand two hundred units the beginning inventory product b is two thousand seven hundred units the desired inventory inventory is three thousand two hundred okay so we're going to try to focus in on product a so we need to figure out what we need to purchase now when we think about what we need to purchase we have to start off that that conversation out with how much do we think we're going to sell how much do we think we're going to sell of product a throughout the year so projected sales of product a because that's what we're focusing on here is twenty thousand two hundred units twenty thousand two hundred so that's how much we need twenty thousand two hundred units now that if that was it if we were starting from nowhere that's how much that's how much we would have to basically purchase or produce if we wanted to sell that much but this is not our first year for one which means that we have beginning inventory already so we don't have to have the whole twenty thousand two hundred because we already have some in beginning inventory and it's also true that we want to basically a cushion at the end so we want a desired ending inventory and so so we want something at the end and what will that desired ending inventory be now they're gonna they're gonna give us the beginning number that's what we'll typically know and then we're gonna basically calculate off that what the desired ending is so they tell us that here the desired ending inventory of product a is 30% higher than its beginning inventory so I'm gonna do that in a separate calculation we're gonna say the beginning inventory is twenty two hundred two thousand two hundred and we want it to be 30% higher because it's going to be a 30% higher for the ending inventory so that would be point three 30% or if we go to the home tab I'm gonna add some decimals it's point three that would be 30% or if we hit the percent sign 30% same thing that means that we want an increase of 2,200 times 30% and that will give us the increase of 660 that's the amount of the increase so what's the ending balance going to be then we want it to be this 2,200 plus the increase the 30% increase of 660 now once again we could do that quicker we could do that quicker we could say okay the beginning inventory is two two zero zero two thousand two hundred times not 30% but 100 plus 30% 1.3 1.3 and if we go to the home tab numbers and we add decimals it's 1.30 1.3 is the same as if we make it a percent the 130 percent and we do that with one calculation then we're gonna just say okay I want this 2,200 times the original 100 plus the 30 130 percent and that will bring us to the 2,860 so if we were starting at a point of zero we don't have any we don't have any inventory we would need to produce the projected sales in units 20,200 and we would have to produce enough to have our desired ending inventory which in this case happens to be the beginning inventory I'm just going to recalculate it here 20,200 times 1.3 130% enter so there's there's that okay and then that's what we would have if we didn't have something in there already but we already have a beginning balance we already have a beginning balance and we're going to subtract that out so if we didn't have any beginning balance we would have to have the 20,200 plus this much for a cushion at the end but there's already something in there in the beginning so we're going to say minus the 2,200 that's in there at the beginning so if we sum that up then we're going to say what we need to produce then is going to be this 20,002 plus what we want at the end minus what's already in there and that will be the 20,860 if we did that in a calculator all we're doing there would be of course taking the 20,200 plus the 2,860 minus 2,200 giving us the 20,860