You are a consultant with Honest Daves Accounting LLP in Calgary, AB. Yesterday you had a meeting
Question:
You are a consultant with Honest Dave’s Accounting LLP in Calgary, AB. Yesterday you had a meeting with a new client, Harry Vardon. Mr. Vardon has just inherited the BallyGlenGally Golf Club from his father.
The BallyGlenGally Golf Club is located in Airdrie, just north of Calgary. It is a public golf course; golfers can buy season passes entitling them to unlimited golf during the season, which runs from May through October, depending on the weather. Golfers can also pay a daily greens fee, entitling them to play 18 holes on that day. The Club has a small dining room where golfers can eat; occasionally, this room is used to cater for special events such as weddings. The Pro Shop sells golf merchandise (clothing, clubs, and golf balls) as well as lessons. Golfers can practice at the driving range (“the Range”) by paying for a bucket of balls.
Mr. Vardon has always loved golf and is looking forward to operating the club. However, he has no experience in running a golf club; up to now, he has run a small employment firm supplying part-time workers to the oil industry.
He is worried about the club’s financial performance over the past several years and has asked you for advice. He wants to know if there are any specific items in the income statement that need improvement. He has asked you to look at the trends and industry benchmarks, and tell him where he needs to concentrate his efforts. He has given you a summary of the club’s performance over the past several years.
“For the typical public golf course that grosses $1.4 million, administrative costs of $200,000, food and beverage expenses of $100,000, pro shop expenses of $300,000, and maintenance costs of $550,000 could be anticipated.”
J. J. Keegan (28 December 2018). Generally Accepted Accounting Principles – Are There Rules for Golf Courses? https://jjkeegan.com/generally-accepted-accounting-principles-are-there-rules-for-golf-courses/
Required:
Write a brief memo to Mr. Vardon, giving him your analysis and recommendations about which items require his attention.
Income Statement, BallyGlenGally Golf Club
2015 | 2016 | 2017 | 2018 | 2019 | |
($000) | ($000) | ($000) | ($000) | ($000) | |
Revenue | |||||
Green fees | $600 | $621 | $700 | $718 | $735 |
Season passes | $116 | $138 | $151 | $189 | $210 |
Carts | $165 | $190 | $200 | $198 | $167 |
Merchandise | $120 | $141 | $165 | $178 | $175 |
Food and Beverage | $421 | $520 | $569 | $598 | $620 |
Range | $31 | $35 | $40 | $39 | $46 |
Other | $47 | $53 | $51 | $47 | $66 |
Subtotal | $1,500 | $1,698 | $1,876 | $1,967 | $2,019 |
Cost of goods-Merchandise | $82 | $100 | $115 | $132 | $139 |
Cost of Goods-Food and Beverage | $141 | $234 | $256 | $281 | $304 |
Cost of Goods Sold | $223 | $334 | $371 | $413 | $443 |
Net Operating Income | $1,277 | $1,364 | $1,505 | $1,554 | $1,576 |
Administration | $255 | $289 | $319 | $340 | $345 |
Food and Beverage | $100 | $115 | $130 | $129 | $136 |
Pro Shop | $325 | $370 | $400 | $425 | $437 |
Maintenance | $600 | $680 | $745 | $742 | $750 |
Other | $51 | $42 | $57 | $35 | $49 |
Total Expenses | $1,331 | $1,496 | $1,651 | $1,671 | $1,717 |
EBITDA | -$54 | -$132 | -$146 | -$117 | -$141 |
Interest, Taxes, Depreciation, Amortization | $38 | $46 | $37 | $30 | $35 |
Net Income | -$92 | -$178 | -$183 | -$147 | -$176 |
Expert Answer:
Individual Memo report Date 7 November 2020 To Luca Pacioli the partner at BizAccounting From Staff accountant with BizAccounting LLP Subject Recommendations regarding revenue or cost items Mr Vardon ... View the full answer
