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8. BONUS: Nilam Patel is the primary stockholder in two hotel corporations. One corporation owns a...

  1. 8. BONUS: Nilam Patel is the primary stockholder in two hotel corporations. One corporation owns a 90‐room economy property located in the suburbs of a large western town. The other corporation is a 350‐room full‐service convention hotel in the downtown city center for which Nilam has employed a management company to operate the property. Nilam is preparing balance sheets for both properties using a common size format. Complete the two balance sheets. Then answer the questions that follow.

    Nilam Patel's Two Hotel's Balance Sheets

    December 31 Common Size
    90‐Room Property 350‐Room Property 90‐Room Property (%) 350‐Room Property (%)
    ASSETS
    Current Assets
        Cash
             Cash in House Banks $86,000
             Cash in Demand Deposits 85,000 330,250
                                            Total Cash 103,500 416,250
         
    Short‐Term Investments 56,000 165,000
    Receivables
             Accounts Receivable 150,000 327,150
             Notes Receivable 35,000 136,250
             Other 750 30,800
                                     Total Receivables 185,750 494,200
             Less Allowance for Doubtful Accounts 19,250
                                     Net Receivables 166,500 431,900 1.4 1.1
             Due from Management Company 50,000 0.0 0.1
             Food Inventories 15,125 69,750 0.1 0.2
             Beverage Inventories 42,550 0.0 0.1
             Gift Shop Inventories 300 6,950 0.0 0.0
             Supplies Inventories 6,550 13,550 0.1 0.0
             Prepaid Expenses 56,000 120,100 0.5 0.3
             Deferred Income Taxes—Current 48,000 135,000 0.4 0.3
                                     Total Current Assets
    Investments 72,500 274,150 0.6 0.7
    Property and Equipment
        Land 2,000,000 8,450,000
        Building 6,500,000 18,500,000
        Leaseholds and Leasehold improvements 2,037,250 5,850,000
        Furnishings and Equipment 1,288,000 3,105,000
             Total Property and Equipment 11,825,250 35,905,000
        Less Accumulated Depreciation and Amortization 575,000 2,575,000
             Net Property and Equipment 11,250,250 38,480,000
    Other Assets
        Intangible Assets 75,000 0.0 0.2
        Deferred Income Taxes—Non‐current 66,000 158,000 0.6 0.4
        Operating Equipment 35,100 111,000 0.3 0.3
        Restricted Cash 25,000 95,000 0.2 0.2
                             Total Other Assets 126,100 439,000 1.1 1.1
    TOTAL ASSETS 100.0 100.0
    LIABILITIES AND OWNERS' EQUITY
    Current Liabilities
        Notes Payable
            Banks 17,500 116,250 0.1 0.3
            Others 8,000 17,500 0.1 0.0
                     Total Notes Payable 25,500 133,750 0.2 0.3
        Accounts Payable 2,500 125,100
        Accrued Expenses 45,000 42,500
        Advance Deposits 500 42,250
        Income Taxes Payable 15,000 78,000
        Deferred Income Taxes—Current 40,000 235,000
        Current Maturities of Long‐Term Debt 420,000
        Other 50,000 58,000
               Total Current Liabilities 598,500 2,399,600 5.0 5.9
    Long‐term Debt, Net of Current Maturities
        Mortgage Note 24,383,030
        Obligations Under Capital Leases 18,000 385,000 0.2 0.9
              Total Long‐Term Liabilities 6,868,000
    Owners' Equity
        Common Stock 500,000 2,000,000
        Paid in Capital 8,711,500
        Retained Earnings 879,325 2,765,070
                       Total Owners' Equity 4,434,325 13,476,570
    TOTAL LIABILITIES AND OWNERS' EQUITY 100 100
    1. What was the amount of cash in the 90‐room property's Cash in House Banks account at year end?
    2. What is the amount of Allowance for Doubtful Accounts in the 350‐room property? Do you think it is excessive? Explain your answer?
    3. What would explain the lack of a beverage inventory value in the 90‐room hotel?
    4. What was the dollar amount of Total Assets in the 90‐room hotel?
    5. What was the dollar amount of Total Assets in the 350‐room hotel?
    6. What was the dollar amount of Current Maturities of Long‐Term Debt in the 350‐room property? Why is that amount likely so much higher than for the 90‐room property?
    7. What was the dollar amount of Paid in Capital for the 90‐room property?
    8. What is the Owners' Equity percentage of Total Assets in the 90‐room property? What is it in the 350‐room property?

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