17. | Pro-Forma Financial Statements
The Gold Bay Hotel is in the process of developing a master budget and pro-forma financial statements. The beginning balance sheet for the current fiscal year is estimated to be:
Gold Bay Hotel Estimated Balance Sheet Current Year | Cash | $20,000 | Accounts Payable | $20,000 | Accounts Receivable | 30,000 | Notes Payable | 500,000 | Facilities | 3,010,000 | Capital Stock | 100,000 | Accumulated Dep. | (1,100,000) | Retained Earnings | 1,340,000 | Total Assets | $1,960,000 | 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 pro-forma financial statements for the end of the current year.
Expected sales: | | Room rental (30,000 rooms) ($90/room) | $2,700,000 | Meals (40,000 meals) ($20/meal) | 800,000 | Total sales | $3,500,000 | Variable costs: | | Rooms (30,000 rooms) ($30/room) | $900,000 | Meals (40,000 meals) ($8/meal) | 320,000 | Total variable costs | $1,220,000 |
Gold Bay Hotel Estimated Income Statement Current Year | Sales | $3,500,000 | Variable costs | (1,220,000) | Fixed costs (not including depreciation) | (2,000,000) | Depreciation | (500,000) | Interest expense | (50,000) | Expected Loss | ($270,000) |
Gold Bay Hotel Estimated Cash Flow Statement Current Year | Cash flows from operations: | | | Net Loss | ($270,000) | | Depreciation | 500,000 | | Increase in accounts receivable | (10,000) | | Increase in accounts payable | 10,000 | | Total | | $230,000 | Cash flow for investments: | | | Refurbish kitchen | | (200,000) | Cash flow from financial transactions: | | | Retirement of note | | (100,000) | Net cash outflows | | ($70,000) | Beginning cash balance | | 20,000 | Ending cash balance | | ($50,000) |
Gold Bay Hotel Estimated Balance Sheet 12/31/Current Year | Cash | ($50,000) | Accounts Payable | $30,000 | Accounts Receivable | 40,000 | Notes Payable | 400,000 | Facilities | 3,210,000 | Capital Stock | 100,000 | Accumulated Dep. | (1,600,000) | Retained Earnings | 1,070,000 | Total Assets | $1,600,000 | Total Equities | $1,600,000 |
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