is it possible to see how this is done? I deeply appreciate seeing how to finish

Question

is it possible to see how this is done? I deeply appreciate seeing how to finish these accounts

The Great Escape M INTRODUCTION Janine Hanckel owns and operates a sport fishing vessel called "The Great Escape." The boat caters to the tourist trade and can carry as many as 50 passengers. Occupancy has averaged 50 percent for the past several years. Due to bad weather conditions, the boat gener ally operates 280 days each year. The projected income statement for the upcoming accounting period is presented below The Great Escape Projected Income Statement For the Year Ended December 31, 19x4 Boarding fees ($35 per passenger) Operating expenses* Net loss $245,000 5,000 Operating expenses include $3 per passenger for bait costs and $2 per passenger for city harbor fees. (variable costs) Hanckel uses a cash-only policy in running the business. No personal checks or credit are accepted, and no credit-card sales are made. Hanckel has noticed that some of her competitors have begun to accept other forms of payment, and those skippers have had higher occupancy rates lately. Hanckel is disturbed, because The Great Escape" consistently "out-fishes" the other boats Hanckel has discussed the problem with her CPA. The CPA told her that sales normally increase when customers are permitted to use personal checks or bank credit cards bt that most cash cus- tomers also change payment methods when alternatives are avail- able. At the end of their meeting Hanckel's CPA estimated that 1. 90 percent of the customers would use a bank credit card, on which a 5 percent service charge would be imposed by the bank 5 percent of the customers would pay by check. 2. 3. Approximately 20 percent of the checks written would never clear because of nonsufficient funds (NSF) 5 percent of the customers would continue to pay with cash. 4. 5. The boat occupancy rate would increase from 50 percent to 60 percent 6. Operating expenses (exclusive of bait costs and harbor fees) would rise by 3 percent as a result of the increased passenger load. DIRECTIONS 1. Prepare an analysis showing the attractiveness of the alterna- tive methods of paymeni (i.e, cash-only versus cash, checks and credit cards)on profitability Based on your schedule, determine whether you would advise Hanckel to change her payment policy. 2. 3. What other factors should be considered in the decision to change from a cash-only policy?

Explanation / Answer

1. If All modes are used for accepting payments

2.

Hanckel should change its payment policy and should start accepting all modes because net benefit in all modes of payment is $14,380 where in only cash is $5,000. that means if hanckel will accept all modes of payments it will receive an extra benefit of $9,380

3.

Factors considered in decision are:

a. Increase in occupancy due to change in payment method policy

b. Increase in operating expenses

c. Amount of bad debt that could be ocurred.

Particulars Amount Revenue (280 days x 50 passengers x 60%) x $35 $294,000 Less: Operating Costs       Bait and Harbour cost (8,400 passengers x $5) $42,000       Other Operating Cost ($250,000 - (7,000 x $5)) x 1.03 $221,450       Service Charge ($294,000 x 90% x 5%) $13,230       Check bad debt ($294,000 x 5% x 20%) $2,940 Net Benefit $14,380

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