MacBook Pro Financial Statement Case A group of BU graduates recently established a partnership called BU Associates- BUA. Each member has saved some money after working in the hotel industry. BUA has decided to build and operate a 20-unit highway budget motel. BUA invests $$0,000 of its own money in the company. They also obtain a long-term mortgage on the land and months of the new business, and principal payments are expected to be $500 per month. (estimated 30 year life), and furniture, fixture and equipment at $36,000 (estimated 10 written off (depreciated) over five years. BUA also prepaid advertising costs of S1,200 building for $200,000. Interest is estimated to be $1,500 per month for the first few Cash was paid for land at $20,000, building construction and completion at $180,000 year life). for brochures and other items. This cost will be written off during the first year of Linen also was purchased with cash for $9,000. This linen amount will be business. The first year's insurance premium of $2,400 was also prepaid before the business started For the first two months of business, occupancy is forecast to be 80% and 90% respectively, and, in order to build up volume, a competitive average room rate of $100 is to be offered. When calculating revenue, use a 30-day month for simplicity, and round monthly revenue figures to the nearest $1. All revenue will be on a cash basis. Since the motel is relatively small, BUA partners (2 members) will run it themselves, but expect to hire 3 front desk employees, 1 maintenance staff and 4 housekeeping maids. Average payroll per employee is expected to be of $2,000 per month. Partners of BUA will each be paid S3,000 a month by the company for their services. to pay them the balance. estimated to be 30% of monthly revenue. This will be paid in cash. Utility costs are However, for each of the first six months, they will each only take $2,000 cash out of the business for living expenses, until they are sure the company has sufficient cash resources Direct operating expenses have not been mentioned above (other than payroll) are forecast to be 5% of rooms revenue for each month, however, the month-one cost will not be paid until month two, and so on. Office expenses expected to be 2% of rooms revenue per month in cash. Dividends will be declared each month, 50% of net earnings (income) and will be paid out on the following month. For each of the first three months of the motel's operation, prepare a cash budget, an income statement, the balance sheet for the end of each month and cash flow statement of month 2 and 3 based upon the tax rate of 20%
