The Dragonfly Inn is bed and breakfast located in the country. The Inn offer's a variety...
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The Dragonfly Inn is bed and breakfast located in the country. The Inn offer's a variety of outdoor and leisure activities for guests. Market research shows guests in prior year's enjoyed the remote location and amenities the Inn provided. Recently a new Inn has opened closer to city limits and with rising gas prices the Inn has noticed a decrease in customers. With less customers, the company has experienced a decrease in cash flows and thus had to reduce their advertising. For the new operating year, the establishment estimates a decrease revenue. The company forecasts the following hotel and restaurant revenues along with the selling and administrative costs, operating costs, estimated income taxes and cash flows: 1. The Inn has 50 rooms and is predicting the following occupancy for each quarter: Quarter 1 (January to March, 90 operating days), 50% occupancy, average room rate of $200 per night. a. b. Quarter 2 (April to June, 91 operating days), 70% occupancy, average room rate of $230 per night. c. Quarter 3 (July to September, 92 operating days), 80% occupancy, average room rate of $260 per night. d. Quarter 4 (October to December, 81 operating days, the Inn closes for the Christmas break), 75% occupancy, average room rate of $220 per night. 2. The accompanying restaurant has a capacity of 40 seats and will operate the same days as the hotel. The company estimates the following for all meals: a. Quarter 1- A turnover of 3 is expected with an average meal price of $15. b. Quarter 2- A turnover of 5 is expected with an average meal price of $18. c. Quarter 3- A turnover of 7 is expected with an average meal price of $21. d. Quarter 4- A turnover of 6 is expected with an average meal price of $19. 3. Quarter 1 and Quarter 4, Selling and administrative expenses are estimated to be $250,000. a. Quarter 2 selling and administrative expenses are estimated to be 10% higher than Quarter 1. b. Quarter 3 selling and administrative expenses are estimated to be 5% higher than Quarter 2. 4. Operating expenses are estimated to be $2,600,000 for the year. 5. Income taxes are estimated to be 25% of income before taxes. 6. The company has a beginning balance of $15,000. Cash collections from customers are estimated to be 85% of the sales revenues. The Inn is also expecting to sell some of the furnishings for $10,000. 7. For cash disbursements, the company projects to pay: a. 90% of the selling & administrative costs (the remaining to be paid in the following year). b. 100% of the operating expenses - included is $100,000 of depreciation. c. 100% of the income taxes. 8. For the new year, the company hopes to maintain a $30,000 cash balance. Required 1. Prepare an income statement for the year for the establishment (there is no cost of goods sold). 2. Prepare a cash budget for the year. 3. Discuss the economic factors impacting the establishment and how they have impacted the establishment. 4. Identify and discuss 2 benefits of budgeting for the establishment. The Dragonfly Inn is bed and breakfast located in the country. The Inn offer's a variety of outdoor and leisure activities for guests. Market research shows guests in prior year's enjoyed the remote location and amenities the Inn provided. Recently a new Inn has opened closer to city limits and with rising gas prices the Inn has noticed a decrease in customers. With less customers, the company has experienced a decrease in cash flows and thus had to reduce their advertising. For the new operating year, the establishment estimates a decrease revenue. The company forecasts the following hotel and restaurant revenues along with the selling and administrative costs, operating costs, estimated income taxes and cash flows: 1. The Inn has 50 rooms and is predicting the following occupancy for each quarter: Quarter 1 (January to March, 90 operating days), 50% occupancy, average room rate of $200 per night. a. b. Quarter 2 (April to June, 91 operating days), 70% occupancy, average room rate of $230 per night. c. Quarter 3 (July to September, 92 operating days), 80% occupancy, average room rate of $260 per night. d. Quarter 4 (October to December, 81 operating days, the Inn closes for the Christmas break), 75% occupancy, average room rate of $220 per night. 2. The accompanying restaurant has a capacity of 40 seats and will operate the same days as the hotel. The company estimates the following for all meals: a. Quarter 1- A turnover of 3 is expected with an average meal price of $15. b. Quarter 2- A turnover of 5 is expected with an average meal price of $18. c. Quarter 3- A turnover of 7 is expected with an average meal price of $21. d. Quarter 4- A turnover of 6 is expected with an average meal price of $19. 3. Quarter 1 and Quarter 4, Selling and administrative expenses are estimated to be $250,000. a. Quarter 2 selling and administrative expenses are estimated to be 10% higher than Quarter 1. b. Quarter 3 selling and administrative expenses are estimated to be 5% higher than Quarter 2. 4. Operating expenses are estimated to be $2,600,000 for the year. 5. Income taxes are estimated to be 25% of income before taxes. 6. The company has a beginning balance of $15,000. Cash collections from customers are estimated to be 85% of the sales revenues. The Inn is also expecting to sell some of the furnishings for $10,000. 7. For cash disbursements, the company projects to pay: a. 90% of the selling & administrative costs (the remaining to be paid in the following year). b. 100% of the operating expenses - included is $100,000 of depreciation. c. 100% of the income taxes. 8. For the new year, the company hopes to maintain a $30,000 cash balance. Required 1. Prepare an income statement for the year for the establishment (there is no cost of goods sold). 2. Prepare a cash budget for the year. 3. Discuss the economic factors impacting the establishment and how they have impacted the establishment. 4. Identify and discuss 2 benefits of budgeting for the establishment.
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Answer rating: 100% (QA)
1 Income Statement The Dragonfly Inn For the Year Ended December 31 20xx Revenues Room revenues Quarter 1 50 occupancy x 90 days x 200 per night 81000 Quarter 2 70 occupancy x 91 days x 230 per night ... View the full answer
Related Book For
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Posted Date:
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