please journalize the case. please prepare the income statement of the case. please prepare balance sheet of the case.

Monday. EXHIBIT 2 2005 Operating Data for Motels with 40 or Fewer Units (expressed as percentages of total revenues) EXHIBIT 3 Additional Information about the Business 98.7 1,3 100.0 12000'in masraflan - Gizartir Revenues: Room rentals Other revenue Total revenues Operating expenses: Payroll costs Administrative and general Direct operating expenses Fees and commissions Advertising and proinotion Repairs and maintenance Utilities Total Fixed expenses. Property taxes, fees Insurance Depreciation Interest Rent Total Profit (pretax) 22.5 4.2 5.9 3.3 1.2 4.8 7.5 49.1 Chargeable in 2004 but paid in January 2005: Wages and salaries 5795 Advertising 600 Payroll taxes 84 - Fuel for heating 933 Telephone 105 Electricity 360 Property taxes 1,005 Insurance 2,025 interest 687 Chargeable in 2005 but not paid by December 31, 2005: Wages and salaries 1,128 V Advertising 996 Payroll taxes 126 Fuel for heating 75 Cleaning and other supplies 153 Telephone V Electricity 492 Property taxes 579 Interest Accrised etnis 840 - ama 4.4 2.5 12.5 7.7 2.8 r 1,119 - e Elain 29.9 20.7 Alsa, 2005 depreciation charges of 30.289 Also 20s tash receipts in Jayment in company tort hurt tented central veits during Desentant for a convention in the nearby city, There were no suck uncollected results of Decemar 31, 2005, 236758-1,662 from rooms and percentage corposition of each expense for more useful comparison with the journal's figures. Questions and so forth. Also Ms. Carter inquired about income from room rentals. He asked if any of the cash receipts dur- irg 2005 related to rentals during 2004 and if there were any rentals during 2005 that had not been collected. During the two weeks Mr. Carter was back at the home office, Mrs. Kim checked the records and com- piled the additional information requested by Mr. Carter. The evening Mr. Carter returned to the Pineirce Motel, Mrs. Kim gave him a summary of the information she had gathered (Exhibit 3). With all the additional mfor- mation, Mr. Carter constructed a 2005 operating state- ment that matched in form the one appearing in the trade journal. lle calculated both the dollar announts 1. Prepare a 2005 operating statement for the Pinetree Motel such as the one shown in Exhibit 2 showing dollar amounts and percentages of total revenues 2. As Mr. Carter, what conuents would you make to the Kims regarding the motel's progress to date? Case 3-4 Pinetree Motel Mr. and Mrs. Tlyong Kim bad purchased the Pinetree Motel in 1998 with their life savings, supplemented by a loan from a close personal friend. The motel con sisted of 20 units fic., sentable roems, and was located near a Facation area that was popular during both the sutrumer and winter seasons. The Kims had entered the motel business because Mrs. Kim had long wanted to run a business of her own * Copyright by James S. Reece. payrol ex 2,189 repla Creo Both Mr. and Mrs. Kit felt that they had been suc- EXHIBIT 1 cessful. Each year saw a growth in revenue from room Cash Register and Checkbook entals. Furthermore, their bank balance had in- Sumanary During 2005 creased. They noted that many of their customers re- Receipts fumed year after year. This was attributed to their lo- cation and their efforts to provide consistently clean From rooms $236,758 rooms and up-to-date furnishings. From vending machines 7,703 The Kitts had no formal business training but felt Total 5224,461 their experience since acquiring the motel had alerted them to the inanagement problems involved. Both Mr. Checks Drawn and Mrs. Kim devoted their full time to operating the Owners' drawings S 86,100 motel In addition, they hired part-time help for daily Wages and salaries 2003 Joom-clcuning work. They had no dining facilities but Faid to laundry 8,800 had installed vending machines to supplement room Replacement of glasses, bed linens, rentals. The vending machines posed no inventory or and towels 1,660 Advertising raictenance problems as the vending inachine com- 2,335 pany provided servicing and maintenance. Payroll taxes 2,894 Auel for heating 12,205 A frequent guest at Pinetree Motel was Marcus Repairs and maintenance 8.980 poid. Carter, controller of a large company. Mr. Carter vis- Cleaning and other supplies 6,820 ited a company branch plant near the motel several Vielephone times a year. As he stayed at the motel during these Electricity 5,611 trips, he became acquainted with the Kims. Veroperty taxes 9,870 In May 2006 Mrs. Kim showed Mr. Carter the cur. Insurance 11,584 rent issue of a notel trade journal that contained oper Anterest 10,605 Total ating data for motels with 40 or fewer units for the $196,558 calendar year 2005. Mrs. Kim commented: "These prolit figures show a profit of 21 percent. Our profit last year 47,903. wa ST34,003 Yn sules of $244.46 or $5 percent. We bank balunce has steadily risen. Furthermore, I have a think 2005 was our best year to date, but we can't local accountant make out the annual income tax state- make our figures jube with those in the magazine, and ments se I don't have to worry about them. That in- we wonder if we really are 34 percent ahead of the in- come tax stuff is so complicated that I avoid it." dustry average. Can you help us?" M. Carter worked with the trade journal's figures Mr. Carter was interested and willing to help. He (Exhibit 2) and the cash summary (Exhibit 1) that Told Mis. Kim to get the available figures for 2005 so evening and quickly found he needed more informa that he could look them over that eversing. Tlse princi- tion. lie told Mis. Kim that he was returning to the pal records the Rims kept to reflect the motel's finan- home office the next monzing but would be back in cial transactions were a record of receipes taken from two weeks for another visit to the branch plant. Mcan- the cash register and a checkbook describing cash paid while, he wanted Mrs. Kim to get together some addi- out. In addition, certain rough notatioas of other es- senal information. Mr. Carter suggested to Mrs. Kim penses incurred were available. that an important noncasl expense was depreciation Mr. Carter also wanted to know about expenses that That evening Mrs. Kim showed Mr. Carter the cash had been incurred in 2004 but not paid until 2005. He summary for the year 2005. as given in Exlubit 1. Mr. told Ms. Kim to check up on wages and salaries, in- Carter inmediately noted that the difference berseen. surance, advertising, taxes, utilities, and any other receipts and expenditures was 547,903 and asked Mrs. items paid in 2005 but applicable to 2004. Kim to explain why she had stated the profit was In addition, Mr. Carter instructed Mrs. Kim to try $134.002. Mrs. Kim replied, "Oh, that's easy. Our to find items of expense properly chargeable 10 2005 drawings aren't expenses: after all, we are the owners. but not paid by December 31, 2005. Sirs. Kit told My husband and I have consistently taken only about Mr. Carter the same types of expenses were involved 885.000 a year out because we want the rest of the that is, wages and salaries, insurance, advertising, taxes, profits to accumulate in the business. As I said, our Del she Monday. EXHIBIT 2 2005 Operating Data for Motels with 40 or Fewer Units (expressed as percentages of total revenues) EXHIBIT 3 Additional Information about the Business 98.7 1,3 100.0 12000'in masraflan - Gizartir Revenues: Room rentals Other revenue Total revenues Operating expenses: Payroll costs Administrative and general Direct operating expenses Fees and commissions Advertising and proinotion Repairs and maintenance Utilities Total Fixed expenses. Property taxes, fees Insurance Depreciation Interest Rent Total Profit (pretax) 22.5 4.2 5.9 3.3 1.2 4.8 7.5 49.1 Chargeable in 2004 but paid in January 2005: Wages and salaries 5795 Advertising 600 Payroll taxes 84 - Fuel for heating 933 Telephone 105 Electricity 360 Property taxes 1,005 Insurance 2,025 interest 687 Chargeable in 2005 but not paid by December 31, 2005: Wages and salaries 1,128 V Advertising 996 Payroll taxes 126 Fuel for heating 75 Cleaning and other supplies 153 Telephone V Electricity 492 Property taxes 579 Interest Accrised etnis 840 - ama 4.4 2.5 12.5 7.7 2.8 r 1,119 - e Elain 29.9 20.7 Alsa, 2005 depreciation charges of 30.289 Also 20s tash receipts in Jayment in company tort hurt tented central veits during Desentant for a convention in the nearby city, There were no suck uncollected results of Decemar 31, 2005, 236758-1,662 from rooms and percentage corposition of each expense for more useful comparison with the journal's figures. Questions and so forth. Also Ms. Carter inquired about income from room rentals. He asked if any of the cash receipts dur- irg 2005 related to rentals during 2004 and if there were any rentals during 2005 that had not been collected. During the two weeks Mr. Carter was back at the home office, Mrs. Kim checked the records and com- piled the additional information requested by Mr. Carter. The evening Mr. Carter returned to the Pineirce Motel, Mrs. Kim gave him a summary of the information she had gathered (Exhibit 3). With all the additional mfor- mation, Mr. Carter constructed a 2005 operating state- ment that matched in form the one appearing in the trade journal. lle calculated both the dollar announts 1. Prepare a 2005 operating statement for the Pinetree Motel such as the one shown in Exhibit 2 showing dollar amounts and percentages of total revenues 2. As Mr. Carter, what conuents would you make to the Kims regarding the motel's progress to date? Case 3-4 Pinetree Motel Mr. and Mrs. Tlyong Kim bad purchased the Pinetree Motel in 1998 with their life savings, supplemented by a loan from a close personal friend. The motel con sisted of 20 units fic., sentable roems, and was located near a Facation area that was popular during both the sutrumer and winter seasons. The Kims had entered the motel business because Mrs. Kim had long wanted to run a business of her own * Copyright by James S. Reece. payrol ex 2,189 repla Creo Both Mr. and Mrs. Kit felt that they had been suc- EXHIBIT 1 cessful. Each year saw a growth in revenue from room Cash Register and Checkbook entals. Furthermore, their bank balance had in- Sumanary During 2005 creased. They noted that many of their customers re- Receipts fumed year after year. This was attributed to their lo- cation and their efforts to provide consistently clean From rooms $236,758 rooms and up-to-date furnishings. From vending machines 7,703 The Kitts had no formal business training but felt Total 5224,461 their experience since acquiring the motel had alerted them to the inanagement problems involved. Both Mr. Checks Drawn and Mrs. Kim devoted their full time to operating the Owners' drawings S 86,100 motel In addition, they hired part-time help for daily Wages and salaries 2003 Joom-clcuning work. They had no dining facilities but Faid to laundry 8,800 had installed vending machines to supplement room Replacement of glasses, bed linens, rentals. The vending machines posed no inventory or and towels 1,660 Advertising raictenance problems as the vending inachine com- 2,335 pany provided servicing and maintenance. Payroll taxes 2,894 Auel for heating 12,205 A frequent guest at Pinetree Motel was Marcus Repairs and maintenance 8.980 poid. Carter, controller of a large company. Mr. Carter vis- Cleaning and other supplies 6,820 ited a company branch plant near the motel several Vielephone times a year. As he stayed at the motel during these Electricity 5,611 trips, he became acquainted with the Kims. Veroperty taxes 9,870 In May 2006 Mrs. Kim showed Mr. Carter the cur. Insurance 11,584 rent issue of a notel trade journal that contained oper Anterest 10,605 Total ating data for motels with 40 or fewer units for the $196,558 calendar year 2005. Mrs. Kim commented: "These prolit figures show a profit of 21 percent. Our profit last year 47,903. wa ST34,003 Yn sules of $244.46 or $5 percent. We bank balunce has steadily risen. Furthermore, I have a think 2005 was our best year to date, but we can't local accountant make out the annual income tax state- make our figures jube with those in the magazine, and ments se I don't have to worry about them. That in- we wonder if we really are 34 percent ahead of the in- come tax stuff is so complicated that I avoid it." dustry average. Can you help us?" M. Carter worked with the trade journal's figures Mr. Carter was interested and willing to help. He (Exhibit 2) and the cash summary (Exhibit 1) that Told Mis. Kim to get the available figures for 2005 so evening and quickly found he needed more informa that he could look them over that eversing. Tlse princi- tion. lie told Mis. Kim that he was returning to the pal records the Rims kept to reflect the motel's finan- home office the next monzing but would be back in cial transactions were a record of receipes taken from two weeks for another visit to the branch plant. Mcan- the cash register and a checkbook describing cash paid while, he wanted Mrs. Kim to get together some addi- out. In addition, certain rough notatioas of other es- senal information. Mr. Carter suggested to Mrs. Kim penses incurred were available. that an important noncasl expense was depreciation Mr. Carter also wanted to know about expenses that That evening Mrs. Kim showed Mr. Carter the cash had been incurred in 2004 but not paid until 2005. He summary for the year 2005. as given in Exlubit 1. Mr. told Ms. Kim to check up on wages and salaries, in- Carter inmediately noted that the difference berseen. surance, advertising, taxes, utilities, and any other receipts and expenditures was 547,903 and asked Mrs. items paid in 2005 but applicable to 2004. Kim to explain why she had stated the profit was In addition, Mr. Carter instructed Mrs. Kim to try $134.002. Mrs. Kim replied, "Oh, that's easy. Our to find items of expense properly chargeable 10 2005 drawings aren't expenses: after all, we are the owners. but not paid by December 31, 2005. Sirs. Kit told My husband and I have consistently taken only about Mr. Carter the same types of expenses were involved 885.000 a year out because we want the rest of the that is, wages and salaries, insurance, advertising, taxes, profits to accumulate in the business. As I said, our Del she