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Hospitality Management Accounting 8th Edition Michael M. Coltman, Martin G. Jagels - Solutions
1 Discuss the ways in which long-term asset management differs from dayto-day budgeting.
P11.13 Cece Saw, a carpenter who has saved some money, has decided to build and operate, with his wife, a ten-unit highway budget motel. Cece invests $50,000 of his own money in the company ($10,000 by way of common stock and $40,000 as a long-term loan). He also obtained a long-term mortgage on
P11.12 Fritz, the owner of the Ritz Cafe, needs an after-tax cash flow of $27,000 next year. Principal payments on loans are $42,000 a year, and depreciation is $21,000. Tax rate for the Ritz Cafe is 25 percent. Fixed costs(including depreciation) are $55,000, and variable costs are 30 percent of
P11.11 Stew and Brew have decided to lease a new restaurant. Rent for the building will be $3,000 a month to be paid on the first day of each month. They initially invested $225,000 of their own money, which was used in part to purchase:Furniture and equipment $180,000 China, glass, and silverware
P11.10 A new restaurant was incorporated on January 1, 2005. Forty thousand shares were issued for $6.00 cash per share. The cash received from the sale of shares was used, in part, as follows:Construction of building, estimated life 20 years $120,000 Kitchen equipment and restaurant furniture,
P11.9 From the information following for Cato’s Catering, prepare a cash budget for six months commencing April 1:
P11.7 For each of the following alternatives, calculate the minimum account receivable payment (to the closest dollar) that would make a lockbox system profitable:Bank Charge Opportunity Days per Item Cost Saveda. $0.20 10% 2b. $0.18 8% 3c. $0.25 8.5% 4 P11.8 A small motel with a small dining room
P11.6 A motel chain uses a system of concentration banking. Calculate the transfer frequency for each of the following individual motels:
P11.5 A small hotel provided you with the following information for a threemonth period showing, at each month-end, the length of time its accounts receivable were outstanding at that time:January February March 0–30 days $21,100 $21,500 $22,100 31–60 days 4,900 7,500 8,500 61–90 days 1,000
P11.4 You own a new restaurant that is due to open on June 1. The restaurant expects to take in $1,500 a day in sales revenue and is open seven days a week. Sales revenue is estimated to be 80 percent cash and 20 percent credit. The payments on credit sales are not expected until the end of the
P11.3 You have the following information about a restaurant:Budgeted Budgeted Cash Revenue Credit Revenue August $30,300 $16,000 September 29,500 14,000 October 27,900 13,000 November 25,100 12,000 December 32,400 15,800 Collections on credit revenue average 90 percent in the month following the
P11.2 On December 31, 2004, a small motel has a bank balance of $7,100.On that same date its balance sheet showed that it had a bank loan payable of $73,900. The motel’s budgeted income statement is as follows for 2005:
P11.1 You have the following information about a restaurant in year 2005:Actual sales revenue October $84,000 November 80,000 Actual purchases (cost of sales) October 32,000 November 30,000 Sixty percent of sales revenue is cash; 40 percent is credit. Of the credit revenue, 70 percent is collected
E11.5 A restaurant has provided the following information regarding its food inventories for the month of March.Beginning food inventories $18,300 Purchases during the current month 72,600 Ending food inventories, current month 12,200a. Calculate the food inventory turnover for the month.b.
E11.4 The following is income statement information of a restaurant for the first two months of operation. Of the sales revenue, 80 percent is collected in cash with the remainder collected in the following month. Of cost of sales, 75 percent is paid in the current month and the remainder is paid
E11.3 A restaurant reported the following information for the months of August, September, and October, year 2005. Of the cost of sales, 75 percent is paid in the current month and the remainder is paid in the following month. Of the operating expenses, 98% is paid in the current month and the
E11.2 The following information is available regarding sales revenue for March, April, and May, year 2004: Credit card sales are collected on the average of every three days and the amount remaining uncollected at the end of the month represents 8 percent of the month’s credit card sales revenue.
E11.1 The following information is available regarding sales revenue for March and April, year 2004: What is the vertical common-sized analysis (percentages) of all items based on sales revenue? Discuss any significant findings.
16. Differentiate between an operating cash budget and a long-term cash flow budget.
15. Explain why it is important to manage food or beverage inventory turnover.
14. Discuss the use of marketable securities with reference to temporary surplus cash.
13. Explain how a lockbox is used to minimize funds outstanding in accounts receivable.
12. Explain the procedure of aging accounts receivable.
11. What two procedures can be instituted in a hotel to minimize the dollar amount of house accounts?
10. Differentiate between city ledger accounts receivable and house accounts receivable in a hotel.
9. What two procedures will help ensure that the total accounts receivable amount is kept to a minimum?
8. Explain concentration banking and give the equation for funds transfer frequency when concentration banking is used.
7. Define the term bank float and explain how it can be used.
6. List three items that could appear in the financing section of a cash budget.
5. List three items that could appear on a cash budget under the disbursements section.
4. List two items that could appear on a cash budget under the receipts section.
3. Why is net income shown on an income statement not necessarily the same as cash?
2. What two main purposes are served by preparing a cash budget?
1. What is the meaning of cash management or cash planning?
8 Explain long-term cash flow budgeting, and use CVP to calculate the revenue required to provide a desired cash flow amount.
7 Discuss the importance of marketable securities with reference to surplus cash funds.
6 Prepare a schedule of aging of accounts receivable.
5 Explain some of the procedures that can be used to minimize outstanding accounts receivable at any given time, including the use of a lockbox.
3 List items that would appear under cash receipts and cash disbursements on a cash budget, and with appropriate information prepare a cash budget.
2 Explain why net income on an income statement is not necessarily indicative of the amount of cash on hand.
1 Explain why cash planning is necessary, and state the two main purposes of cash budgeting.
P10.9 A motel has the following balance sheets at the end of each of its most recent two years of operation.
P10.8 A catering company reported the following additional financial statements and information for two successive years:Additional financial information:1. In Year 2005, the building that was previously rented was purchased for $150,000. The company paid $10,000 cash and assumed a longterm
P10.7 Referring to the preceding Problems 10.5 and 10.6 that presented a comparative balance sheet, income statement, and a statement of retained earnings, complete a statement of cash flows in good form using the indirect method.
P10.6 With the balance sheet information from Problem 10.5, and the additional information from the income statement and statement of retained earnings, prepare the motel’s statement of changes to working capital for the year ending December 31, 2005.
P10.5 A motel has the following comparative balance sheets for two years:From this information, prepare a statement of changes to individual working capital accounts.
P10.4 Refer to information provided in the preceding P10.3 and complete in good form an SCF using the indirect method.
P10.3 You have the following comparative balance sheets for a restaurant for the years ending December 31, 2004, and December 31, 2005. Calculate the change in working capital and prepare the restaurant’s statement of sources and uses of working capital for the year ending December 31, 2005.a.
P10.2 Balance sheet information for a resort hotel reflects the changes to current accounts that occurred over the annual operating period ended December 31, 2005. Cash account balance at December 31, 2004, was$14,000 and the ending cash balance at December 31, 2005, is $27,600.Additional
P10.1 The following is provided to complete the operating activities section of a statement of cash flows, indirect method.a. Net income for the year is $20,000.b. Accounts receivable increased by $12,000.c. Inventory decreased by $4,000.d. Depreciation expense for the year is $8,000.e. Accounts
E10.12 The following are operating transactions that occurred during the current year. Analyze each transaction and explain if the transaction will increase, decrease, or have no effect on working capital.a. Purchased inventory on account, $5,400; terms 2/5, n/30.b. Borrowed $40,000 on a long-term
E10.11 A restaurant purchased new kitchen equipment for $35,000. Old kitchen equipment was sold for $800. A long-term investment was sold for$50,000. Equity stock was bought back (repurchased) for $12,000, and a cash dividend was paid in the amount of $40,000. The company increased its long-term
E10.10 Assume a business enterprise reports its total current assets as $24,000 and its total current liabilities as $16,000. Answer the following:a. What is the amount of working capital?b. What is the current ratio (also called the working capital ratio)?
E10.9 A review of a balance sheet indicated the beginning and ending totals of current assets and current liabilities for a one-year operating period. Determine the working capital at the beginning and the end of the year. Calculate the change in current assets, current liabilities, and working
E10.8 Assume the book value of an item of equipment shows $50,000 in year one and $44,000 in year two. Would the $6,000 difference be treated as an inflow source, outflow use, or not shown at all with regard to its effect on working capital?
E10.7 Assume working capital was $44,000 for a given year. During this year, accounts receivable decreased by $1,400, inventory increased by $8,000, and accounts payable decreased by $2,000. Determine the amount of cash from operations.
E10.6 Given the following information regarding investing and financing activities of an SCF, evaluate each of the given transactions and identify to which section, investing (invest) or financing (finance), the transaction belongs. In addition, identify how the amount is handled. Use Increase for
E10.5 A hotel provided the following information for year 2006: The cash flow from operating activities was $143,200, average current liabilities were $68,300, average total liabilities were $823,300, and total revenue for the year was $2,406,800. Interest was $68,000. Calculate the following
E10.4 Identify how each of the following items would be treated in an analysis of changes to working capital. Answer with the word Inflow to show an increase or Outflow to show a decrease in working capital.
E10.3 Net income is $260,000; Depreciation expense is $42,000; Accounts receivable increased $2,500; Credit card receivables decreased $4,600;Prepaid insurance increased $2,400; Inventory increased by $4,500;Accounts payable decreased $3,000; and Accrued payroll payable increased $3,600. Complete
E10.2 A monthly income statement reported net income of $80,000. Inventory for resale increased by $14,000. Accounts payable increased by$16,000. Using only these three items, determine the net cash flow from operations, indirect method.
E10.1 The following lists current asset and current liability accounts. Identify each account as a current asset (CA) or a current liability (CL) account.After classifying each account, determine how the change in the account balance is treated in the conversion of accrual net income to the cash
12. If a business operation has a current ratio of 1.251, what does this mean relative to working capital?
11. What is a statement of source inflows and use outflows of working capital?
10. Explain why depreciation expense is treated as a source inflow of working capital.
9. List the three major common source inflows and the three major common use outflows of working capital.
8. Of what use is the statement of source inflows and use outflows of working capital?
7. What is working capital?
6. What are the primary items by category analyzed in the SCF, investing section?
5. The financing section of an SCF can analyze three different items by category. What are they?
4. What is the typical noncash item, by name, that is automatically added back in the operating activities section of the SCF?
3. If a current asset account increases, how is the increase treated in the statement of cash flows?
2. What are the major operating accounts by category analyzed in the SCF, indirect method?
1. What is the purpose of the SCF?
20 What amount of cash did the proprietor or the partners withdraw?
19 What amount was paid out as dividends?
18 How much cash was received through the sale of ownership equity?
17 How much cash was used to reduce or pay off long-term liabilities?
16 How much cash was obtained by incurring long-term liabilities?
15 How much cash was received from the disposal of long-term investments?
14 How much cash was recovered from the disposal of furnishings, fixtures, equipment, or other long-lived physical assets?
13 How much was invested in capital assets, such as new furnishings, equipment, or other long-term physical assets?
12 Did normal operation activities generate the major portion of cash inflows?
11 How much did the cash position increase or decrease from operating activities since the last accounting period?
10 Explain whether or not the hospitality industry can operate on a relatively low current ratio.
9 Explain the common uses of major elements in both the statement of cash flows and the various statements used to analyze working capital.
8 Explain why cash does not always increase by an amount equal to net income.
7 Prepare a change to working capital accounts and identify the net change to working capital.
6 List and briefly explain some of the sources and uses that change working capital.
5 Define working capital.
4 Explain how depreciation expense, amortization expense, and gains or losses on the disposal of noncurrent assets apply in increasing or decreasing the adjustment to net income.
3 Explain the effect that changes in current asset and current liability accounts have on the adjustment of accrual net income or net loss to cashbased net income or net loss.
2 Identify the three sections of the statement of cash flows and explain the nature of the types of transaction.
1 Define the purpose of the statement of cash flows.
P9.13 The manager of the Hospitality Inn has developed regression analysis equations for forecasting the hotel’s dining room sales volume based on the hotel’s anticipated guest night count. The monthly equations (where y equals the forecast number of meals to be served, and x equals the number
P9.12 You have the following guest-nights and meals-served figures for the past 12 months for the Inland Inn.
P9.11 You have been asked to help prepare the operating budget for a proposed new 100-room motel, with a 65-seat coffee shop, 75-seat dining room, and 90-seat cocktail lounge. The operating budget for the first year will be based on the following information:Rooms Department Occupancy is 60 percent
P9.10 An 80-room motel forecasts its average room rate to be $66.00 for next year at 75 percent occupancy. The rooms department has a fixed wage cost of $171,450. Variable wage cost for housekeeping is $7.50 an hour;it takes one-half hour to clean a room. Fringe benefits are 15 percent of total
P9.9a. Budgeted liquor sales at a banquet were 1,500 drinks at $3.15 each.Actual sales were 1,550 drinks at $2.85 each. Determine the price and sales volume variances.b. Banquet food sales for a month were estimated to be 20,000 covers at $10.80 each. Actual sales were 21,000 customers at $11.25
P9.8 A restaurant’s average monthly income statement is as follows:The owner is considering two possible alternatives for the coming year:By improving purchasing and reducing portions, cutting the food cost from 45 percent to 40 percent of food sales revenue. There would be no other
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