The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel, is seeking a bank loan of...

Transcribed Image Text:

The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel, is seeking a bank loan of $90,000 bearing a 10 per cent annual rate of interest. Mr Scroogy, the manager of the bank considering the loan application, requires the motel to produce a budgeted income statement for next year, 20X1. Mr Scroogy needs this information to help him assess RitzyRoom's credit risk. RitzyRoom's accountant has assembled the following information to facilitate preparation of 20X1's budgeted income statement: Number of single rooms 10 Forecasted occupancy of single rooms Forecast ADR for single rooms Gross profit margin of single rooms Number of double rooms Estimated occupancy of double rooms Forecasted ADR for double rooms Gross profit margin of double rooms Operating fixed costs per annum (before interest) 70% $50 85% 30 40% $70 90% $180,000 Tax rate levied on profit after deduction of interest expense 40% a) Assuming the motel is open 360 nights of the year, prepare the budgeted income statement for 20X1. Include the interest on the $90,000 loan in the budgeted statement. The manager of RitzyRooms, a small 40-room Saskatchewan roadside motel, is seeking a bank loan of $90,000 bearing a 10 per cent annual rate of interest. Mr Scroogy, the manager of the bank considering the loan application, requires the motel to produce a budgeted income statement for next year, 20X1. Mr Scroogy needs this information to help him assess RitzyRoom's credit risk. RitzyRoom's accountant has assembled the following information to facilitate preparation of 20X1's budgeted income statement: Number of single rooms 10 Forecasted occupancy of single rooms Forecast ADR for single rooms Gross profit margin of single rooms Number of double rooms Estimated occupancy of double rooms Forecasted ADR for double rooms Gross profit margin of double rooms Operating fixed costs per annum (before interest) 70% $50 85% 30 40% $70 90% $180,000 Tax rate levied on profit after deduction of interest expense 40% a) Assuming the motel is open 360 nights of the year, prepare the budgeted income statement for 20X1. Include the interest on the $90,000 loan in the budgeted statement.

Answer rating: 100% (QA)

Heres the budgeted income statement for RitzyRooms for the year 20X1 including the interest on the 9... View the full answer