Question:
Mr. and Mrs. Ilyong Kim had purchased the Pinetree Motel in 1998 with their life savings, supplemented by a loan from a close personal friend. The motel consisted of 20 units (i.e., rentable rooms) and was located near a vacation area that was popular during both the summer and winter seasons. The Kims had entered the motel business because Mrs. Kim had long wanted to run a business of her own.
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1. Prepare a 2005 operating statement for the Pinetree Motel such as the one shown in Exhibit 2 showing dollar amounts and percentages of total revenues.
2. As Mr. Carter, what comments would you make to the Kims regarding the motel's progress to date?
Transcribed Image Text:
EXHIBIT1 Cash Register and Checkbook Summary During 2005 Receipts From rooms From vending machines $236,758 7.703 5244,461 Total Checks Drawn Owners' drawings Wages and salaries Paid to laundry Replacement of glasses, bed linens, $ 86,100 26,305 8,800 and towels Advertising Payroll taxes Fuel for heating Repairs and maintenance Cleaning and other supplies Telephone Electricity Property taxes Insurance Interest 1,660 2,335 2,894 12,205 8,980 6,820 2,789 5,611 9,870 11,584 10,605 $196,558 Total EXHIBIT 2 2005 Operating Data for Motels with 40 or Fewer Units (expressed as percentages of total revenues) Revenues: Room rentals Other revenue 98.7 1.3 100.0 Total revenues Operating expenses: Payroll costs Administrative and general Direct operating expenses Fees and commissions Advertising and promotion Repairs and maintenance Utilities Total 22.5 4.2 5.9 3.3 1.2 4.8 7.5 49.4 Fixed expenses: Property taxes, fees Insurance Depreciation Interest Rent Total 4.4 2.5 12.5 7.7 2.8 29.9 Profit (pretax) 20.7 EXHIBIT 3 Additional Information about the Business Chargeable in 2004 but paid in January 2005: Wages and salaries Advertising Payroll taxes Fuel for heating Telephone Electricity Property taxes Insurance Interest 5795 600 84 933 105 360 1,005 2,025 687 Chargeable in 2005 but not paid by December 31, 2005: Wages and salaries Advertising Payroll taxes Fuel for heating Cleaning and other supplies Telephone Electricity Property taxes Interest 1,128 996 126 840 75 153 492 1,119 579