You have been assigned to prepare and analyze pro forma financial statements for the Spartan Hotel. The Spartan Hotel is a full service 280 room property which is in the process of being purchased by a group of private investors. The property has been fully renovated with the exception of the hotel's restaurant which in the process of construction and will be open in January 2019 at a cost of $780,000. The hotel has historically had an average room rate of $180 per night with an average occupancy rate of 86% annually. The total food and beverage revenues for 2018 are expected to be unchanged at $890,000 for the year. The hotel's food and beverage department have traditionally had an 80% to 20% mix of food to beverage revenues. Other income generated mostly from in-room services and is equal to 2.5% of the hotel's total rooms revenue. Cost of sales percentage will remain constant for the 4 years. After meeting with the investors, management and the controller of the hotel you have been given the following information and forecasted figures in order to prepare the 2018-2021 pro forma income statement and the 2018-2021 pro forma balance sheet. Assume all expense percentages remain constant except where increases are noted. Ignore the fact that 2020 is a leap year.

2019

Rooms revenues will increase by 3.75% over 2018

Food and Beverage revenues will increase by $4500 per day over 2018

Other income will increase by 1.5% over 2018

Salaries, wages, and benefits will increase by 0.7% over 2018

Utility expenses will increase by 0.5% over 2018

2020

Rooms revenues will increase by 6% over 2019

Food and Beverage revenues will increase by 14% over 2019

Other income will increase by 1.0% over 2019

Salaries, wages, and benefits will increase by 1.0% over 2019

Direct operating expenses will increase by 0.4% over 2019

Utility expenses will increase by 0.5% over 2019

2021

Rooms revenues will increase by 6% over 2020

Food and Beverage revenues will increase by 12% over 2020

Other income will decrease by 1.5% over 2020

Salaries, wages, and benefits will increase by 0.5% over 2020

Direct operating expenses will increase by 0.4% over 2020

General & Administrative expenses will increase by 0.3% over 2020

Utility expenses will increase by 0.6% over 2020

Occupancy costs will increase by 0.7% over 2020

NOTE: For all years assume that food to beverage revenues mix remains 80% to 20% Round all figures after calculating to the nearest dollar (no cents) and percentages to the nearest 0.1% (i.e. 23.441 = 23.4)

Balance Sheet Information

Use the Balance Sheet information to calculate the pro forma ratios

Calculate the following ratios for the Spartan Hotel's financial analysis (2019 - 2021)

Return on Assets

Return on Equity

Debt ratio

Debt to Equity ratio

Current ratio

Profit margin

Income Statement

Balance Sheet

NAME Spartan Hotel Pro Forma Income Statement Revenues Rooms Food Beverage Other Total Revenues Cost of sales Gross Profit Expenses Salaries, Wages and Benefits Direct Operating Expenses Marketin Repair and Maintenance General and Administrative expenses Utilities Total Operating Expen 2018 2019 2020 2021 Dollars Dollars Dollars Dollars 290% 29.0% 290% 29,0% 33.0% 60% 40% 60% 50% 50% ses Occupancy Expense Pro Insurance Depreciation Interest Total Non-operating Expenses 50% 3.0% 1.0% 50% 30% taxes Total Expenses Total Income (Loss) before Taxes NAME Spartan Hotel Pro Forma Income Statement Revenues Rooms Food Beverage Other Total Revenues Cost of sales Gross Profit Expenses Salaries, Wages and Benefits Direct Operating Expenses Marketin Repair and Maintenance General and Administrative expenses Utilities Total Operating Expen 2018 2019 2020 2021 Dollars Dollars Dollars Dollars 290% 29.0% 290% 29,0% 33.0% 60% 40% 60% 50% 50% ses Occupancy Expense Pro Insurance Depreciation Interest Total Non-operating Expenses 50% 3.0% 1.0% 50% 30% taxes Total Expenses Total Income (Loss) before Taxes