Kenley Ryan, the owner of Kenley’s Resort and Country Club, has hired you to prepare the income statement for the year ending December 31, 2020. She has provided you with the following information and has requested you follow the format established in the USASH. Account Account Balance Insurance (Fire) ? Rooms department – salaries and wages 90,000 Food department – salaries and wages 60,000 Supplies and other – food department 20,000 Food purchases 60,000 Room sales 525,000 Interest income ? Interest expense 30,000 Cost of food sold ? Food sales 275,000 Administrative and General – salaries and wages 60,000 Information & Telecommunications – other expenses 12,000 Advertising 12,000 Management Fee ? Maintenance - contract 40,000 Depreciation 40,000 Amortization 5,000 Power and Lights 15,000 Supplies and other – room department 30,000 Property taxes 15,000 Franchise Fee 21,450 Administrative & General – other expenses 15,000 Additional Information: The Resort invested $25,000 in the Delaware National Bank earning 8 percent on July 1st. The beginning and ending food inventories were $6,000 and $5,000, respectively. Food consumed by the food and rooms department employees during the year free of charge totaled $400 and $600 respectively. Fringe benefits and payroll taxes for all employees, excluding free food were 20% of gross salaries and wages. The Resort pays an average tax rate of 35%. The management fee is 4% of net room sales and 5% of total income after undistributed operating expenses. Fire insurance was purchased on June 15, 2019 for a two year period of coverage from July 1, 2019 through June 30, 2021. The two year premium was $24,000. Sold some equipment with a book value of $6,000 for $3,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kenley Ryan, the owner of Kenley’s Resort and Country Club, has hired you to prepare the income statement for the year ending December 31, 2020. She has provided you with the following information and has requested you follow the format established in the USASH.

Account	Account Balance
Insurance (Fire)	?
Rooms department – salaries and wages	90,000
Food department – salaries and wages	60,000
Supplies and other – food department	20,000
Food purchases	60,000
Room sales	525,000
Interest income	?
Interest expense	30,000
Cost of food sold	?
Food sales	275,000
Administrative and General – salaries and wages	60,000
Information & Telecommunications – other expenses	12,000
Advertising	12,000
Management Fee	?
Maintenance - contract	40,000
Depreciation	40,000
Amortization	5,000
Power and Lights	15,000
Supplies and other – room department	30,000
Property taxes	15,000
Franchise Fee	21,450
Administrative & General – other expenses	15,000

Additional Information:

The Resort invested $25,000 in the Delaware National Bank earning 8 percent on July 1^st.
The beginning and ending food inventories were $6,000 and $5,000, respectively. Food consumed by the food and rooms department employees during the year free of charge totaled $400 and $600 respectively.
Fringe benefits and payroll taxes for all employees, excluding free food were 20% of gross salaries and wages.
The Resort pays an average tax rate of 35%.
The management fee is 4% of net room sales and 5% of total income after undistributed operating expenses.
Fire insurance was purchased on June 15, 2019 for a two year period of coverage from July 1, 2019 through June 30, 2021. The two year premium was $24,000.
Sold some equipment with a book value of $6,000 for $3,000.

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