From the file Chapter 4 HW: I need answers to 4.9 and 4.15

From the file Chapter 5 HW: I need answers to 5.7 and 5.11

PLEASE THANKS SO MUCH IN ADVANCE!

Prepaid insurance Common stock 4,000(2) 275,000 Investments Land Prepaid maintenance Buildings Furniture 50,000 100,000 1,000 800,000 100,000 Equipment Allowance for doubtful accounts Accumulated depreciation Retained earnings 200,000 2,000 400,000 241,000(3) (1) Fifty thousand of this mortgage payable must be paid on June 30, 20X2. (2) The prepaid insurance of $4,000 pertains to the period of October 1, 20X1-September 30, 20X2. This account has not been adjusted to reflect expired insurance as of December 31, 20X1. (3) This account has not been adjusted to reflect the \"preliminary\" net income of $20,000 for 20X1 or information from note 2 above. Required: Prepare the balance sheet for Adkins Foods at December 31, 20X1. Problem 4.9 Jose Aguilar, owner of the Aguilar Inn, desires to have the inn's income statement prepared in accordance with the USALI. Listed below is financial information for the Aguilar Inn for the year ended December 31, 20X2. Account Title Marketing Expense Depreciation Expense Room Revenue Rent Expense Insurance Expense 84 Account Balance $ 98,500 90,000 1,600,000 120,000 15,000 Income Taxes (tax rate30%) Employee BenefitsRooms Department Food and Beverage Revenue Other ExpenseTelephone Department Administrative and General Expenses ? 40,000 600,000 7,000 250,000 Property Taxes Cost of Food and Beverage Sales 70,000 180,000 CHAPTER 4 A BRIEF REVIEW OF FINANCIAL STATEMENTS PayrollTelephone Department RevenueRental and Other Income RevenueTelephone Department 14,000 10,000 40,000 Data Processing Expenses Human Resources Expenses Salaries and WagesRooms Department Interest Expense Other ExpensesFood and Beverage Department 34,000 20,000 200,000 110,000 90,000 Other ExpensesRooms Department Property Operation and Maintenance Cost of SalesTelephone Department PayrollFood and Beverage Department Energy Costs 160,000 80,000 30,000 200,000 150,000 Required: Prepare the income statement following the USALI. (If you do not have a copy of the USALI, use Exhibit 4-2 as a guide.) Problem 4.10 Fred Basel, owner of the Mid-East Diner, is confused about the differences between net income and cash flow from operations. His bookkeeper provides you with the following information for 20X3: A. Operations Information Sales Labor Cost of food sales Depreciation Income taxes expense Other expenses $800,000 300,000 320,000 40,000 10,000 110,000 B. Other Information 1. 2. 3. 4. Increase in accounts receivable during 20X3 $30,000 Decrease in accounts payable during 20X3 $10,000 Payment of income taxes in 20X3 $20,000 Wages paid employees in 20X3 $310,000 Required: 1. Calculate the net income for the Mid-East Diner for 20X3. 2. Calculate the cash flow from operations for the diner for the year. 3. Explain the differences between net income and cash flow from operations for the diner for 20X3. PROBLEMS 85 Problem 4.11 David Bates has managed the Westside Inn for 30 years, and the books have always been kept on a cash basis. Now the Westside's new owner is requiring that the books be maintained on an accrual accounting basis. Several transactions have been selected to illustrate the differences. The transactions are as follows: Cash Net Income $-0- $ 3,000 2. Purchased microcomputer for $2,500 on April 2. ___________ ___________ 3. Paid $150 for office supplies on April 3 which are to be expensed. ___________ ___________ 4. Paid wages of $1,000 on April 4. $700 relates to work performed by the employees in March and is recorded as expense in March. ___________ ___________ 5. Sold capital stock for $2,500 on April 5. ___________ ___________ 6. Cash received on account for $1,500 on April 6. ___________ ___________ 7. Paid the mortgage payment of $1,500 on April 7. The payment includes $1,000 of interest expense of which $750 was accrued at the end of March. ___________ ___________ 8. Cash dividend of $500 was paid on April 8. ___________ ___________ 9. Cash sales of $500 were made on April 9. ___________ ___________ 10. A travel advance was made to D. Bates for $100 on April 10. ___________ ___________ 11. Food for resale is purchased on account for $300 on April 11. Food purchases account is detailed. ___________ ___________ 12. Equipment is purchased on April 12 for $2,000. Cash of $1,000 is paid and a note payable is signed for the remainder. ___________ ___________ 1. Sales on account for April 1 total $3,000. Required: Indicate in the columns to the right the impact of each transaction on (a) cash and (b) net income for the month of April. Ignore any tax effects of these transactions. 86 CHAPTER 4 A BRIEF REVIEW OF FINANCIAL STATEMENTS Problem 4.12 Robert Woods, the owner of Woods' Place, has hired you to prepare the income statement for the year ending December 31, 20X1. He has provided you with the balances of each of the general ledger accounts. Manager's Salary Interest Revenue Cost of CallsTelephone Department Beginning InventoryFood and Beverage Fire Insurance $ 45,000 1,000 25,000 12,000 3,000 CommissionsRooms Department PurchasesFood and Beverage Depreciation Other Selling Expenses Other Operating ExpensesFood 3,000 140,000 200,000 14,000 60,000 Management Fees Other Operating ExpensesRooms Electric Expense Rent Expense Water Expense 75,000 160,000 35,000 20,000 27,000 Interest Expense Revenues Rooms Food and Beverage Telephone Rental Revenues Property Taxes Salaries and Related Expenses Rooms Food and Beverage Marketing Property Operation and Maintenance Telephone Administrative and General (other than GM's salary) 20,000 1,500,000 450,000 80,000 7,000 50,000 400,000 105,000 24,000 25,000 20,000 55,000 Other Department Expenses Administrative and General Marketing (other than selling expenses) Property and Maintenance 30,000 50,000 40,000 Tax Rate Ending InventoryFood and Beverage 25% 15,000 PROBLEMS 87 Required: Prepare an income statement in accordance with the USALI. (If you do not have a copy of the USALI, use Exhibit 4-2 as a guide.) Problem 4.13 Ron Rhoades, the owner of Rhoades Resort, has hired you to prepare the resort's income statement for the year ending December 31, 20X4. He has provided you with the balances of each of the general ledger accounts. Cost of CallsTelephone Ending InventoryFood and Beverage ConcessionsRevenue PurchasesFood and Beverage Depreciation Other Operating ExpensesFood and Beverage Other Operating ExpensesRooms Electric Expense Rent Expense Water Expense Other Operating ExpensesTelephone Interest Expense Revenues Rooms Food and Beverage Telephone $ 22,820 15,386 1,473 134,999 76,366 60,002 151,123 33,583 80,000 26,859 1,647 42,833 1,075,475 418,076 53,898 Salaries and Related Expenses Rooms Food and Beverage Marketing Property Operation and Maintenance Telephone Administrative and General 178,461 105,519 50,000 20,170 22,000 70,000 Other Departmental Expenses Administrative and General Property Operation and Maintenance Marketing 30,000 45,000 40,000 Tax Rate 25% Required: 1. Prepare the income statement in accordance with the USALI. (If you do not have a copy of the USALI, use Exhibit 4-2 as a guide.) Note: The beginning inventory of food and beverages was $18,795. 2. Prepare an income statement to be issued to external users. 88 CHAPTER 4 A BRIEF REVIEW OF FINANCIAL STATEMENTS Problem 4.14 The Warwick Motel has two major operating departmentsrooms and food. The following information is supplied to you as of December 31, 20X6: Account Title Insurance (Fire) General Manager's Salary (Adm. & Gen.) Salaries and WagesRooms Salaries and WagesFood SuppliesFood Account Balance $ 5,000 30,000 80,000 60,000 20,000 Food Purchases Room Sales Interest Income Interest Expense Cost of Food Sold 55,000 380,000 1,000 21,000 ? Food Sales Wages (Adm. & Gen.) Advertising Property Operation and Maintenance Depreciation 180,000 25,000 10,000 30,000 30,000 Heat Power and Lights Supplies and OtherRooms Property Taxes Other ExpensesAdm. & Gen. 15,000 12,000 30,000 12,000 10,000 Other information is as follows: 1. The beginning and ending inventories of food were $2,000 and $3,000, respectively. 2. Fringe benefits and payroll taxes for all employees are 15% of salaries and wages. 3. The Warwick Motel pays an average of 25% of its pre-tax income to the various governmental units in the form of income taxes. Required: Prepare an income statement for 20X6 for the Warwick Motel based on the USALI. (If you do not have a copy of the USALI, use Exhibit 4-2 as a guide.) PROBLEMS 89 Problem 4.15 Goran Blomberg is interested in investing in a new rooms-only lodging property. He needs some financial projections for the proposed operations. He provides the following: 1. Rooms sales a. Average room rate$50 b. Average daily occupancy65% c. Available rooms per day50 2. Fixed labor$12,000/month 3. Other fixed expenses a. b. c. d. Depreciation$5,000/month Utilities$3,000/month Insurance$1,000/month Other$3,000/month 4. Variable labor15% 5. Other variable expenses a. b. c. d. e. Other room expenses5% Administration4% Marketing5% Utilities3% Other8% 6. Income tax rate20% Required: 1. Determine the projected net income using the above information. Assume the property will be open 365 days a year. 2. Determine the projected net income if the room rate is increased to $55. 3. Independent of #2, determine the projected net income if the room rate is increased to $60 and variable labor is 18%. Note: The above projections do not need to be prepared in accordance with the USALI. 90 CHAPTER 4 A BRIEF REVIEW OF FINANCIAL STATEMENTS Sales Beginning inventory Purchases Ending inventory Consumption by employees (free of charge) Number of checks Cost of sales $150,000 8,000 70,000 13,000 3,000 64,139 ? Total room sales were $450,000. Required: 1. Compute the following: a. Paid occupancy percentage for year b. Number of guests per occupied room c. Food cost percentage d. Average room rate e. REVPAR 2. Estimate the room sales in dollars for next year. Assume the average room rate will increase by 10% over the current year. Problem 5.7 The Royce Lodge, a 300-room hotel, has provided you with the following data for the months of January and February. Single rooms sold Double rooms sold Complimentary rooms* Room revenue Number of paid guests January February 2,500 4,400 100 $425,000 11,500 2,480 4,200 90 $410,000 11,030 *Assume that all complimentary rooms are occupied by single guests. Required: 1. Compute the following for January and February: a. Paid occupancy percentage b. Complimentary occupancy c. Multiple occupancy percentage d. Number of guests per occupied room e. Monthly average room rate f. Monthly REVPAR PROBLEMS 143 2. Was the financial performance of the Royce Lodge better in January or February? Assume that fixed costs were constant and that the variable costs per room sold remained constant. Support your answer with detailed discussion. Problem 5.8 The condensed income statements for years 20X1 and 20X2 for the Ruhf Inn are shown below: 20X1 20X2 $2,500,000 400,000 300,000 1,800,000 $3,000,000 500,000 350,000 2,150,000 Undistributed operating expenses Interest expense Rent expense Other fixed charges 500,000 200,000 100,000 400,000 600,000 250,000 120,000 400,000 Income before taxes 600,000 780,000 Income taxes 200,000 260,000 $ 400,000 $ 520,000 Room revenue Roomlabor costs Roomother expenses Room income Net income Required: 1. Determine the following for each year: a. Number of times interest earned ratio b. Fixed charge coverage ratio c. Profit margin d. Room labor cost percentage e. Average tax rate 2. Prepare a common-size income statement for 20X1 and 20X2 and comment on any significant differences in the percentages. Problem 5.9 Lorann Andrews is planning to open a restaurant. She needs your assistance in forecasting the balance sheet using the following information. Round all projections to the nearest thousand. Assume ratios are calculated with ending balances only. Further, assume all sales are credit sales. Sales $1,000,000 Cash 50,000 Accruals 5,000 144 CHAPTER 5 FINANCIAL STATEMENT ANALYSIS Cost of food sold 30% ACP 20 days Inventory turnover 12 times Asset turnover 2 times Current ratio 1.5 Debt-equity 1 to 1 Required: Complete the balance sheet below: Assets Cash Accounts receivable Food inventory Total current assets Property and equipment (net) Total assets Liabilities & Owners' Equity ______ ______ ______ ______ Accounts payable Accrued expenses Total current liabilities Long-term debt ______ ______ ______ ______ ______ ______ L. Andrews capital Total liabilities and owner's equity ______ ______ Problem 5.10 Bondy's Place has selected financial ratios for 20X1-20X3 as follows: Current ratio Accounts receivable turnover Inventory turnover Asset turnover Debt-equity ratio 20X1 20X2 20X3 1.1 13 24 1.3 1.5 1.15 12 23 1.4 1.4 1.2 11 22 1.5 1.3 Sales for the three years were as follows: $1,000,000 $1,200,000 $1,400,000 Required: 1. Assume total assets did not change during 20X3. Determine the total debt at the end of 20X3. 2. If cost of sales were 10% of total sales, what was the average inventory for 20X3? 3. Comment on liquidity of Bondy's Place over the three-year period. Problem 5.11 The Rusty Inn commenced operations on January 1, 20X1, and has been operating for two years. Assume you are the new assistant manager and desire to gain PROBLEMS 145 some insight into financial relationships of your new employer. Balance sheets and condensed income statements for the first two years are provided below. Balance Sheets Rusty Inn December 31, 20X1 and 20X2 20X1 Assets Current Assets Cash Marketable Securities Accounts Receivable Inventories Total Current Assets Property and Equipment Land Building (net) Furniture & Equipment (net) Total Property & Equipment $ 10,000 20,000 45,000 10,000 85,000 20X2 $ 15,000 50,000 60,000 12,000 137,000 100,000 1,950,000 240,000 2,290,000 100,000 1,900,000 200,000 2,200,000 Total Assets $2,375,000 $2,337,000 Liabilities and Owners' Equity Current Liabilities Long-Term Debt Total Liabilities $ 55,000 1,300,000 1,355,000 $ 60,000 1,230,000 1,290,000 Owners' Equity Common Stock Retained Earnings Total Owners' Equity 1,000,000 20,000 1,020,000 1,000,000 47,000 1,047,000 $2,375,000 $2,337,000 Total Liabilities and Owners' Equity Condensed Income Statements Rusty Inn For the years ended December 31, 20X1, and 20X2 Sales Operated Department Expense Operated Department Income Undistributed Operating Expenses Total Income Before Fixed Charges Fixed Charges Income Taxes Net Income 146 CHAPTER 5 FINANCIAL STATEMENT ANALYSIS 20X1 20X2 $1,200,000 600,000 600,000 400,000 200,000 160,000 10,000 $ 30,000 $1,500,000 750,000 750,000 450,000 300,000 180,000 60,000 $ 60,000 Required: 1. Calculate the following ratios for both years: a. Acid-test ratio b. Debt-equity ratio c. Average income tax rate d. Operating efficiency ratio e. Profit margin 2. Also calculate for 20X2 the following ratios: a. Property and equipment turnover ratio b. Total assets turnover ratio c. Accounts receivable turnover ratio d. Number of days accounts receivable outstanding e. Return on total assets f. Return on owners' equity Problem 5.12 The Bouknight Hotel has financial ratios calculated from its annual financial statements for the past four years as follows: Ratio Current ratio Food turnover Accounts turnover Debt-equity ratio Profit margin Asset turnover ratio Years 1 1.04 2 1.12 3 1.08 20 times 25 times 28 times 24 times 2.0 10.1% 1.2 times 20 times 1.8 8.5% 1.5 times 18 times 1.7 8.2% 1.8 times 4 1.20 inventory 25 times receivable 17 times 1.6 7.5% 2.0 times Reynard Bouknight, the owner and manager, desires help in assessing the hotel's changing financial health. Required: 1. Has the hotel's liquidity position improved over the 4 year period? 2. Has the hotel's return on assets improved over the 4 years? 3. Explain why or why not a financial institution would lend more money to this hotel in year 4 than in year 1. PROBLEMS 147