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Hospitality Management Accounting 8th Edition Michael M. Coltman, Martin G. Jagels - Solutions
P3.2 Using the information shown in Problem 3.1, complete a common size vertical balance sheet analysis in proper form for Year 0004 and Year 0005. Comment on any changes you consider significant.
P3.1 Present in the proper form a comparative horizontal analysis of the corporate balance sheet shown below. Comment on any items of difference that you consider significant.
E3.8 Sales revenue for a restaurant operation is given for the months of March, April, and May of Year 0004. The index numbers are stated for each month.Convert March, April, and May to current dollars. Round answers to the nearest dollar.Year 0004 Sales Revenue Index Number
E3.7 The following data from a restaurant operation show a partially completed comparative income statement analysis for two consecutive years. Determine and fill in the missing values and percentages.Changes Year 0003 Year 0004 Dollars %Sales revenue $23,502 $ 1,110 Cost of sales revenue
E3.6 Based on the following, determine the average cost of sales revenue per guest.Cost of Sales Revenue Guests Dining room $51,552 9,206 Bar–Lounge $22,386 5,202
E3.4 A room’s operation had an average room rate of $48.00 in the first year,$44.00 in Year 2, and $53.00 in Year 3. Establish a trend index starting with the average room rate for the first year and determine the index numbers for Year 2 and Year 3.E3.5 Based on the following, determine the
E3.3 Complete a common-size vertical analysis of the condensed income statement presented below.Condensed Income Statement Sales revenue $480,000 Cost of sales 203,600 Gross margin $276,400 Operating expenses 202,400 Operating income $74,000
E3.2 Complete a common-size vertical analysis for the months of July and August using E3.1’s data.
E3.1 A restaurant owner expressed concern about the changes in the cash, credit card receivables, and food and beverage inventories accounts in the months of July and August of the current year. He wants you to show him the dollar changes and the percentage of change for each of these accounts
10. What is the equation for converting past historic period dollars to current period dollars?
9. In inflationary times, why is comparative analysis and a trend index misleading?
8. How is a trend index calculated?
7. Why are trend results often more meaningful than a comparison limited to two successive accounting periods?
6. How is average sales revenue per guest calculated?
5. What is the objective of common-size vertical income statements?
4. Why are differences between two comparative statements frequently better shown in percentages rather than only in dollars?
3. Discuss absolute and relative changes with reference to comparative horizontal financial statement analysis.
2. What is comparative horizontal balance sheet analysis?
1. Explain what items a stockholder reading a financial statement might be interested in that are different from the manager of the enterprise.
7 Use index numbers to convert historic dollars to current dollars.
6 Prepare a trend index.
5 Calculate trend percentages.
4 Calculate average sales, average costs, and average income per guest.
3 Describe common size vertical analysis and use it for balance sheet and income statement analysis.
2 Describe comparative horizontal analysis and use it for balance sheet and income statement analysis.
1 Explain some of the aspects different readers of financial statements are interested in.
P2.8 George Jarvis purchased a trailer park on January 1, 0004. It is now March 31. George has no accounting training but has kept a record of his cash receipts and cash payments for the three months (see next page):As Mr. Jarvis’s accountant, you discover the following additional information:a.
P2.7 Using the adjusted trial balance shown below, prepare a balance sheet in vertical report format. Identify each account using specific categories and classifications such as current assets, current liabilities, and so on. After completing the balance sheet, check off each item in the trial
P2.6 With reference to the information provided for Cindy’s Restaurant in Problem 2.5:a. Calculate the contributory income percentage for each of the three divisions.b. If there were a shift of $16,000 in sales revenue from the banquet area to the dining room, would you expect the restaurant’s
P2.5 Cindy’s Restaurant has three revenue divisions with direct costs and average monthly figures given in the following information:
P2.4 The following information is taken from a perpetual inventory record.Perpetual Inventory Control Record Description: M & B Supreme Date Purchase Received Issued Sales Units Unit Cost June 1 Balance forward 3 $10.00 4 2 6 8 9 $10.50 9 36 12 2 4 15 6 10 $11.00 18 2 8 20 3 5 22 6 11 $ 9.50 25 2 9
P2.3 Dee’s Steak House has separate food and bar operations. Calculate food cost of sales and net food cost of sales for August. The following information is provided:Food inventory, August 1 $14,753 Food inventory, August 31 12,811 Food purchases, August 48,798 Employee meals cost 1,208
P2.2 The Purple Rose Restaurant has the following food cost information for a given month. Calculate the food cost of sales and net food cost of sales for March. The following information is provided:Food inventory, March 1 $2,428 Food inventory, March 31 1,611 Food purchases, March 8,907 Employee
P2.1 Prepare a food department income statement in proper format for the Midlands Restaurant from the following information for the first quarter ended on March 31, year 0004 (other income was received from leasing excess equipment for one month and was not a part of normal operations):Sales
E2.12 A food division reported cost of sales—food of $48,280. Employees meals cost $800, complimentary meals $80, and transfers in were received from the bar operation with a cost of $120. Determine the net cost of sales.
E2.11 A food division had beginning inventory of $4,800, purchases of $12,200, and ending inventory of $3,200. Determine the cost of goods available and cost of sales—food.
E2.10 A department with three operating divisions reported the sales revenues for each of its divisions. Determine the percentage of sales revenue provided by each division:
E2.9 Indirect, undistributed costs of $8,000 are to be allocated to several departments. Two different allocation methods are being considered. Calculate the amount to be allocated for one department based on both the sales revenue and square footage methods. The department contributes 40 percent
E2.8 Match each of the terms in the left column with the account categories given in the right column.a. Total assets—Total liabilities 1. Fixed assetb. Revenue—Total expenses 2. Liabilitiesc. Depreciable asset 3. Contributory incomed. Debt owed to creditors 4. Net assets, owners’ equitye.
E2.7 A department has two operating divisions: Food service with sales revenue of $950,000 and a bar-lounge with sales revenue of $550,950.Calculate the sales revenue of each division as a percentage of total departmental sales revenue.
E2.5 A hospitality operation began with retained earnings of $126,000. During the year, cash dividends of $55,200 were paid to the owners. Net income for the year was $228,000. Answer the following:a. What is the ending balance of retained earnings?b. What would be the ending balance of retained
E2.4 Identify the missing dollar amounts in the equation shown below:Beginning inventory Purchases Ending inventory Cost of sales$40,000 ? $20,000 $100,000
E2.3 A new restaurant purchased the following wine during the first month of operations:March 2: Purchased 12 750ml bottles of M & B wine @ $12.00 each.March 16: Purchased 24 750ml bottles of M & B wine @ $13.00 each March 31: Sold 30 bottles during March @ $26 each.Determine the value of the
E2.2 What is the key word that defines the difference between direct cost and indirect cost?
E2.1 A hospitality operation may maintain a number of different inventory accounts. What determines if an inventory account is classified as a current asset or an other asset?
20. Define the term paid-in capital, excess of par.
19. Define and discuss the weighted average method of inventory control method.
18. Discuss the difference between periodic and perpetual inventory control methods.
17. Explain how the account format of a balance sheet presentation differs from the report format.
16. Why are guest deposits and credit balances on customer accounts shown as current liabilities?
15. Define retained earnings and explain how ending retained earnings is determined.
14. How do current assets differ from fixed assets?
13. For each of the following balance sheet categories, name three accounts and briefly discuss each one:a. Current assetsb. Current liabilitiesc. Fixed assets
12. Why should a change in the revenue mix among departments have any effect on net income, even if there is no change in total revenue?
11. Discuss some specific types of indirect expenses and an appropriate method or methods to allocate them to individual operating departments.
10. Briefly discuss four types of adjustments that may be necessary to convert cost of sales—food, to net cost of sales—food.
9. State the equation for calculating cost of sales and the net cost of sales.
8. What is the difference between FIFO and LIFO inventory control?
7. Explain the terms responsibility accounting and differentiate a profit center from a cost center.
6. In a departmental organization, what is the difference between direct expenses and indirect expenses?
5. What is departmental contributory income?
4. Briefly describe two limitations of a balance sheet.
3. What are the differences between a balance sheet and an income statement?
2. Of what value is the Uniform System of Accounts?
1. Why do managers of a motel or food service operation need financial statements?
11 Prepare a balance sheet in proper format and state the two forms of balance sheet presentations. Discuss the importance and limitations of a balance sheet.
10 Define, calculate, and explain the purpose of retained earnings.
9 List and give an example of each of the six major categories (classifications) of accounts that may appear on a balance sheet.
8 Explain the effect a specific change in interdepartmental revenue mix will have on overall operating income (income before tax).
7 Discuss the concept of responsibility accounting.
6 Prepare income statements in proper format.
5 Calculate the value of ending inventory using each method discussed, and demonstrate possible adjustments to find the net cost of sales.
4 Using examples, describe the difference between a direct cost, indirect cost, and undistributed costs (expenses).
3 Define and explain the difference between a balance sheet and an income statement.
2 Explain the value of a uniform system of accounts.
1 Explain the main purpose of the income statement and balance sheet.
P1.5 Art Angel operated a small seasonal lake marina, renting boats and selling snacks. He rents marina space for four months in Year 2004, from May 15 to September 15, for $800 per month. He started the current season with $15,000 in the bank and paid the marina seasonal rent in advance. In May,
P1.4 Joe Fast started a mobile snack food service on January 2, 2003, investing $12,000 cash deposited in a bank account in the name of “Fast Snacks.” He purchased a second-hand, fully equipped truck. Joe operated on the cash basis of accounting, and at year’s end, he asks you to help him
P1.3 The following transactions occurred for a new motel prior to and during the first month of business operations. Study the motel transactions shown below and record the necessary journal entries, skipping a line between each entry. Journal entries and modified T ledger accounts can be prepared
P1.2 A friend has asked you to look at the accounts of his small restaurant and recommend the end-of-period adjusting entries. After viewing the accounts, it was apparent that the following adjusting entries were required. Complete journal entries for each required adjustment.a. A total of $2,040
P1.1 Study the restaurant transactions for the month of March 2004 shown below, and record the necessary journal entries, skipping a line between each entry. Journal entries and modified T ledger accounts can be prepared easily on lined paper following the examples shown in the text. To further
E1.12 A restaurant pays $9,000 for six months building rent in advance and recognizes rental expense every month.a. What is the monthly rental expense?b. Journalize the monthly adjusting entry.Account Title Debit Credit
E1.11 A business using the cash basis of accounting cannot locate all of its records for a given month of operations. Beginning cash was $14,840 and ending cash was $11,320. Cash payments of $148,000 were verified from vendor receipts. The amount of cash sales is unknown. Determine unknown cash
E1.10 Referring to the journal entries you completed for E1.9, (a) and (c), name and post the journal entries using modified T account format as shown below.Name: Cash Debit Credit Balance(Beginning $18,400 Balance)Name:Debit Credit Balance(Beginning $ -0-Balance)Name:Debit Credit Balance(Beginning
E1.9 A restaurant paid $9,600 cash in advance for liability and casualty insurance for two years of coverage:a. Journalize the transaction for the payment.Account Title Debit Creditb. What is the amount of insurance expense for one year and one month?c. Record the journal entry for six months of
E1.8 Equipment was purchased for $46,000 with an estimated life of five years and residual value is estimated at $2,000. What is depreciation expense for the first year using each of the following separate depreciation methods?a. Sum of the years’ digitsb. Double declining balancec. Straight line
E1.7 A new van was purchased for $40,000 and was estimated to have a life of five years or 120,000 miles; residual value is estimated to be $4,000.In the first year of use, the van was driven for 22,000 miles. Using the units-of-production method, what is depreciation per mile and depreciation
E1.6 Equipment was purchased for $98,000. The equipment is estimated to have a serviceable life of 10 years and a residual value of $2,000. Using straight-line depreciation, answer the following:a. What is the depreciation expense per month and per year?b. Give the journal entry to record the
E1.5 At the end of an accounting period, it was determined that wages of employees ($680) and management salaries ($800) have been earned. Journalize the entry to accrue the wages and salaries expense.
E1.4 Write the abbreviated linear equation for the balance sheet and income statement.Balance sheet equation _______________________________________ Income statement equation ____________________________________
E1.3 Identify the normal balance as debit or credit for each of the following categories of accounts:Ownership Sales Operating Account: Assets Liabilities Equity Revenue Expenses Balance: ______ ________ _________ _______ ________
E1.2 Write a short explanation of the following terms:a. Operating incomec. Net lossb. Net incomed. Breakeven
E1.1 A number of accounting principles and concepts (such as the matching principle) were discussed in this chapter. For each of the following situations, state which principle or concept is involved.a. A case of food poisoning occurred in a restaurant. The restaurant is being sued by a number of
16. Under what circumstances might the individual account balances not be correct even though a trial balance is in balance?
15. A restaurant has purchased a new electronic point-of-sale register. With adequate maintenance the machine could last 10 years; however, with the rapid advance of technological improvements, it is expected that a newer register will be purchased within 5 years to replace the unit recently
14. Explain how the book value of a depreciable asset is determined.
13. Describe the straight-line and units-of-production methods of depreciation.
12. Describe the double-declining balance and the sum-of-the-years’-digits depreciation equations.
11. Explain the concept of accelerated depreciation discussed in this chapter.
10. What is the purpose of an accumulated depreciation account?
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