The Gold Bay Hotel is in the process of developing a master budget and pro-forma

Question

The Gold Bay Hotel is in the process of developing a master budget and pro-forma (budgeted) financial statements for 2014. The beginning balance sheet for the fiscal year 2014 is estimated to be:

Gold Bay Hotel
Estimated Balance Sheet
1/1/14

Cash $    20,000
Accounts Receivable 30,000
Facilities 3,010,000
Accumulated Dep. (1,100,000)
Total Assets $1,960,000

AccountsPayable $     20,000
Notes Payable 500,000
Capital Stock 100,000
Retained Earnings 1,340,000
Total Equities $1,960,000

During the year the hotel expects to rent 30,000 rooms. Rooms rent for an average of $90 per night. The hotel expects to sell 40,000 meals during the year at an average price of $20 per meal. The variable cost per room rented is $30 and the variable cost per meal is $8. The fixed costs not including depreciation is expected to be $2,000,000. Depreciation is expected to be $500,000. The hotel also expects to refurbish the kitchen at a cost of $200,000, which is capitalized (included in the facility account). Interest of the note payable is expected to be $50,000 and $100,000 of the note payable will be retired during the year. The ending accounts receivable amount is expected to be $40,000 and the ending accounts payable is expected to be $30,000.

Required:
Prepare budgeted statements of income and balance sheet for the end of the year.

Explanation / Answer

Gold Bay Hotel Estimated Balance Sheet 01/01/2014 Accounts Payable $           20,000 Cash $             20,000 Notes Payable $         500,000 Accounts Receivable $             30,000 Capital Stock $         100,000 Facilities $        3,010,000 Retained Earnings $      1,340,000 Accumulated Dep. $      -1,100,000 Total Equities $      1,960,000 Total Assets $        1,960,000 Gold Bay Hotel Estimated Balance Sheet 31/12/2014 Accounts Payable $           30,000 Cash $             20,000 Notes Payable $         400,000 Accounts Receivable $             40,000 Interest Payable $           50,000 Facilities $        3,210,000 Expenses Payable $           20,000 Accumulated Dep. $      -1,600,000 Capital Stock $         100,000 Retained Earnings $      1,070,000 Total Equities $      1,670,000 Total Assets $        1,670,000 Rooms rent Meals Total Contribution Unit Rate Amount Unit Rate Amount Sales 30000 $   90 $ 2,700,000 40000 $ 20 $       800,000 Variable Cost 30000 $   30 $    900,000 40000 $   8 $       320,000 Contribution 30000 $   60 $ 1,800,000 40000 $ 12 $       480,000 $               2,280,000 Fixed Cost $               2,000,000 Depreciation $                   500,000 Interest Exp $                     50,000 Income(Loss) $                 -270,000 20000 Op Balance 30000 3500000 3490000 Cash Collection 20000 1220000 1210000 Cash Payments 2300000 Balance 100000 Cash payments on notes retirement 200000 Cash paymments on capital investments 2000000 Fixed Cost 20000 Closing Balance

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