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Hospitality Management Accounting 8th Edition Martin G Jagels, Michael M Coltman - Solutions
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 debt by
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 note.c.
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 payable
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 information
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. Net
Refer to information provided in the preceding P10.3 and complete in good form an SCF using the indirect method.
A motel has the following comparative balance sheets for two years:From this information, prepare a statement of changes to individual working capital accounts. Assets 12-31-04 12-31-05 Current Assets Cash $ 4,100 $ 5,200 Credit card receivables 4,700 5,500 Accounts receivable 1,200 700 Inventory
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. Income Statement for Year Ended December 31, 2005
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.
A catering company reported the following additional financial statements and information for two successive years:Additional financial information:
In Year 2005, the building that was previously rented was purchased for $150,000. The company paid $10,000 cash and assumed a longterm mortgage for $140,000. Depreciation on the building is $7,500 for Year 2005. At the end of year 2005, $7,100 of the mortgage payable was reclassified as a current
Explain what items a stockholder reading a financial statement might be interested in that are different from the manager of the enterprise.
What is comparative horizontal balance sheet analysis?
Discuss absolute and relative changes with reference to comparative horizontal financial statement analysis.
Why are differences between two comparative statements frequently better shown in percentages rather than only in dollars?
What is the objective of common-size vertical income statements?
How is average sales revenue per guest calculated?
Why are trend results often more meaningful than a comparison limited to two successive accounting periods?
How is a trend index calculated?
In inflationary times, why is comparative analysis and a trend index misleading?
What is the equation for converting past historic period dollars to current period dollars?
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 using
Complete a common-size vertical analysis for the months of July and August using E3.1’s data.
Complete a common-size vertical analysis of the condensed income statement presented below. Condensed Income Statement Sales revenue Cost of sales Gross margin Operating expenses Operating income $480,000 203,600 $276,400 202,400 $ 74,000
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
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.
Based on the following, determine the average check per guest. Sales Revenue Guests Dining room Bar-Lounge $128,880 9,206 $ 66,586 5,202
Based on the following, determine the average cost of sales revenue per guest. Cost of Sales Revenue Guests Dining room Bar-Lounge $51,552 9,206 $22,386 5,202
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 Cost of sales revenue $23,502 $ +1,110 -9,208
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 March April $38,000 110
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. ASSETS Current Assets Cash Credit card receivables Accounts receivable Vending inventories Prepaid expenses Total Current Assets
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.
The following information has been extracted from a hotel’s food department for the months of August and September.a. Calculate average check per guest for each sales revenue division for the months of August and September.b. Calculate the average cost per guest and total average cost for each
A company owns two restaurants in the same town. Operating results for the first three months of the current year for restaurants A and B:The owners of the restaurants are concerned that restaurant B reports higher sales revenue, yet produces a lower operating income than restaurant A. Convert the
The sales revenue, food cost of sales, and guests served for a small fastfood carryout division of a restaurant for the past six months are given below.For each of the six months calculate average check and average costs of sales food. Using these averages, calculate an index number. Set the index
A motel had the following annual sales revenue and average room rate figures for the last five years. During this five-year period there were no changes in the number or type of rooms available and the clientele remained basically the same.Prepare trend index numbers from the average room rates
Use the index numbers identified to convert the reported yearly sales revenue to current dollars. After the conversion is completed, comment on the results of your analysis.
Two successive monthly income statements for the food department of a motor lodge are shown below. Present the income statements in a comparative horizontal analysis format. Sales Revenue Room service $11,300 Dining room 75,900 August September $ 9,000 63,700 Bar-lounge 5,500 4,100 Coffee shop
Using the information presented in Problem 3.7, present in proper format a common-size vertical income statement analysis. Comment on any significant results noted.
Freddy’s Fried Chicken provides you with the following information from 2 successive months of his operation:Using the above information, complete the following:a. Convert the income statement to common-size vertical analysis.b. Convert the income statement to a comparative horizontal analysis.c.
You have the following information about Hotshot Hotel’s dining room for the months of October and November:Use this information to comment about the dining room’s operating results for October and November. October Guests November Guests Food sales $ 85,432 2,748 $ 81,718 2,645 Beverage sales
You have the following information about the revenue, cost of sales, and accounts receivable for six consecutive periods for a restaurant:For each of the three items, calculate trend percentages. Using the results from this analysis, discuss whether or not the situation developing for this
Describe the three ways in which a ratio can be expressed.
List and briefly discuss the four bases on which a ratio can be compared.
Which three groups are the main users of financial ratios?
What is the value in calculating a current ratio? Contrast how creditors and owners view this ratio.
Why can a hotel, motel, or restaurant usually operate with a current ratio considerably lower than other types of businesses, such as manufacturing companies?
Why is maintaining a current ratio that is too high not a good business practice?
Explain why the calculation of a credit card receivables average collection period is a meaningful statistic.
Define the term profitability.
Why is a high total asset to total liabilities ratio desired by creditors?
Why can the book values of assets be misleading when used in the total assets to total liabilities ratio, or the total liabilities to total assets ratio?
State the equation for the credit card turnover ratio.
Explain the gross return on assets ratio measure; what value is it to a potential creditor?
How does the net return on assets ratio differ from the gross return on assets ratio, and why is its calculation valuable?
Discuss the purpose of a quick ratio.
What does the return on stockholders’ equity measure?
State how revenue per available room is calculated.
Discuss the term financial leverage, or trading on the equity.
List four possible operating ratios that could be used in a food operation.
List and discuss three operating ratios that could be used in a rooms operation.
What is the advantage of calculating the inventory holding period in days?
A restaurant reported the following current assets: cash $12,000, credit card receivables $1,800, accounts receivable $180, food inventory $4,400, and prepaid expenses, $1,120. Current liabilities total $7,800. Answer the following:a. Calculate the current ratio.b. Calculate the quick ratio (acid
Referring to information in Exercise 4.1, calculate working capital and describe what it means.
On March 31, a restaurant reported credit card revenues of $56,280.Credit card receivables began with a balance of $2,884 and ended the month with a balance of $3,120. Answer the following:a. What is the average of credit card receivables?b. What does credit card receivables represent as a
Total current assets reported for an operation were $86,100 and total current liabilities were $62,400. Determine working capital for the period and define its structure and purpose.
You are given the ending working capital for two consecutive years: Year 1 was $10,500, and Year 2 is $11,550. Sales revenue for Year 2 is$878,444. Calculate the working capital turnover ratio.
A restaurant and beverage operation reported the following for the operating month of March, which had 23 operating days.For the month of March, calculate the food inventory turnover ratio and inventory holding period in days that it takes for food inventory to turn over. Food service inventory:
Prepare a comparative horizontal analysis of the change in each current asset account from Year 1 to Year 2.Express each change in dollars and the percentage each change represents. Comment on each change that exceeds 10 percent. What, if anything, would you do as a manager? Current Assets Year 1
A small restaurant reported the following current assets at year’s end:Cash $1,840, accounts receivable $220, credit card receivables $480, food inventories $1,340, prepaid insurance $400, and prepaid rent $1,000. Current liabilities were $2,112. Complete a common-size vertical analysis of
You have information (on the next page) regarding current assets and current liabilities of a restaurant operation for two successive years:Calculate the following for Years 0003 and 0004:a. Working capitalb. Current ratioc. Quick ratio Sales revenue for Year 0004 is $544,800. The composition of
With reference to the information in P4.2, use a common-size vertical analysis to determine the composition of current assets and current liabilities for Years 0003 and 0004. Discuss the results.
A fire occurred in a friend’s restaurant overnight on December 31, 0005, and the friend has asked for your help. Although many accounting records were lost, some were recovered. With the recovered records and information obtained from outside sources, you believe a balance sheet can be
You have the following information taken from the balance sheets for two successive years for a hotel operation.For each year calculate:a. Total assets to total liabilities ratiob. Total liabilities to total assets ratioc. Total liabilities to total ownership equity Discuss the changes that have
In addition to the information given in Problem 4.5, an income statement for the hotel for Year 0005 is available:For Year 0005, calculate the following:a. Gross return on assetsb. Net return on assetsc. Number of times interest is earnedd. Net income to revenue ratio; discuss hotel profitabilitye.
You have the following information from a restaurant operation:From the information given, calculate the following:a. Working capital for Years 0007 and 0008b. Current ratio for Years 0007 and 0008c. Credit card receivables as a percentage of credit card revenue for Year 0008d. Credit card
The owners of a cocktail bar have the following annual income statement information:The owners are considering new furnishings for the bar at an estimated cost of $20,000 using their own funds. They anticipate the new furnishings will bring in additional customers, and their revenue will increase
Owners of a catering company also own a number of relatively small coffee shops, one of which shows excellent potential to increase its sales revenue. Selected annual operating figures areBased on the potential of increasing revenue, the owners are seriously considering a 10-year lease on an
What are the two basic requirements for an internal control system?
Define collusion and explain why you think it is difficult to detect.
Why is it necessary to define responsibility for particular jobs?
Explain what separation of record keeping from control of assets means.
Explain how lapping works.
What does the term division of responsibilities mean?
List the five documents or forms used for control of purchases. Briefly explain the use of any two of these documents.
List and briefly discuss appropriate procedures for control over product storage and explain how perpetual inventory cards can be used in inventory control.
Why should all cash receipts be deposited intact each day in the bank?
Describe how a petty cash fund is established.
In paying invoices by check, how can control be established?
List the special procedures that are necessary for control of payroll and distribution of paychecks.
Explain the reasons why payment of cash wages should be avoided.
The balance of a company’s check register normally will not agree with the bank statement balance prior to reconciliation. Why?
List the steps to reconcile the bank statement balance to the check register balance.
Define the major objective of internal control.
Define the purpose of a petty cash fund.
A petty cash fund with a $150 limit had receipts of $112 and cash (coin and currency) of $36. Explain the status of the fund.
Explain the purpose of a bank reconciliation.
Explain the purpose of standard cost control.
Identify to what standard food cost percentage is compared.
Assume the same person handles all cash and checks received in payment of an account. Explain how lapping works. Using the following information showing the day in July each payment was received, determine the amount lapped on each day. Comment on how lapping can be prevented. Customer Name Amount
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