The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $64,000 of new equipment each year and wants to begin a fund to purchase a $614,000 piece of property for club expansion. The club manager is concerned about the club’s capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements. CORTEZ BEACH YACHT CLUB Statement of Income (Cash Basis) For the Year Ended October 31 Year 9 Year 8 Cash revenues Annual membership fees $ 850,000 $ 614,000 Lesson and class fees 486,200 374,000 Miscellaneous 5,400 4,400 Total cash received $ 1,341,600 $ 992,400 Cash costs Manager’s salary and benefits $ 86,000 $ 86,000 Regular employees’ wages and benefits 394,000 394,000 Lesson and class employees’ wages and benefits 404,000 314,000 Supplies 34,800 33,800 Utilities (heat and light) 46,800 32,800 Mortgage interest 49,000 54,800 Miscellaneous 5,400 4,400 Total cash costs $ 1,020,000 $ 919,800 Cash income $ 321,600 $ 72,600 Additional Information Other financial information as of October 31, year 9: Cash in checking account, $21,000. Petty cash, $1,300. Outstanding mortgage balance, $888,000. Accounts payable for supplies and utilities unpaid as of October 31, year 9, and due in November, year 9, $6,400. The club purchased $64,000 worth of sailing equipment during the current fiscal year (ending October 31, year 9). Cash of $34,000 was paid on delivery, with the balance due on October 1, which had not been paid as of October 31, year 9. The club began operations in year 3 in rental quarters. In October, year 5, it purchased its current property (land and building) for $1,452,000, paying $268,000 down and agreeing to pay $74,000 plus 5 percent interest annually on the previously unpaid loan balance each November 1, starting November 1, year 6. Membership rose 3 percent during year 9, approximately the same annual rate of increase the club has experienced since it opened and that is expected to continue in the future. Membership fees were increased by 13 percent in year 9. The board has tentative plans to increase them by 12 percent in year 10. Lesson and class fees have not been increased for three years. The number of classes and lessons has grown significantly each year; the percentage growth experienced in year 9 is expected to be repeated in year 10. Miscellaneous revenues are expected to grow in year 10 (over year 9) at the same percentage as experienced in year 9 (over year 8). Lesson and class employees’ wages and benefits will increase to $611,650. The wages and benefits of regular employees and the manager will increase 13 percent. Equipment depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 17 percent.

The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $64,000 of new equipment each year and wants to begin a fund to purchase a $614,000 piece of property for club expansion. The club manager is concerned about the club’s capability to purchase equipment and expand its facilities. One club member has agreed to help prepare the following financial statements and help the manager ascertain whether the plans are realistic. Additional information follows the financial statements. CORTEZ BEACH YACHT CLUB Statement of Income (Cash Basis) For the Year Ended October 31 Year 9 Year 8 Cash revenues Annual membership fees $ 850,000 $ 614,000 Lesson and class fees 486,200 374,000 Miscellaneous 5,400 4,400 Total cash received $ 1,341,600 $ 992,400 Cash costs Manager’s salary and benefits $ 86,000 $ 86,000 Regular employees’ wages and benefits 394,000 394,000 Lesson and class employees’ wages and benefits 404,000 314,000 Supplies 34,800 33,800 Utilities (heat and light) 46,800 32,800 Mortgage interest 49,000 54,800 Miscellaneous 5,400 4,400 Total cash costs $ 1,020,000 $ 919,800 Cash income $ 321,600 $ 72,600 Additional Information Other financial information as of October 31, year 9: Cash in checking account, $21,000. Petty cash, $1,300. Outstanding mortgage balance, $888,000. Accounts payable for supplies and utilities unpaid as of October 31, year 9, and due in November, year 9, $6,400. The club purchased $64,000 worth of sailing equipment during the current fiscal year (ending October 31, year 9). Cash of $34,000 was paid on delivery, with the balance due on October 1, which had not been paid as of October 31, year 9. The club began operations in year 3 in rental quarters. In October, year 5, it purchased its current property (land and building) for $1,452,000, paying $268,000 down and agreeing to pay $74,000 plus 5 percent interest annually on the previously unpaid loan balance each November 1, starting November 1, year 6. Membership rose 3 percent during year 9, approximately the same annual rate of increase the club has experienced since it opened and that is expected to continue in the future. Membership fees were increased by 13 percent in year 9. The board has tentative plans to increase them by 12 percent in year 10. Lesson and class fees have not been increased for three years. The number of classes and lessons has grown significantly each year; the percentage growth experienced in year 9 is expected to be repeated in year 10. Miscellaneous revenues are expected to grow in year 10 (over year 9) at the same percentage as experienced in year 9 (over year 8). Lesson and class employees’ wages and benefits will increase to $611,650. The wages and benefits of regular employees and the manager will increase 13 percent. Equipment depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 17 percent.

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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CORTEZ BEACH YACHT CLUB
Statement of Income (Cash Basis)
For the Year Ended October 31
		Year 9		Year 8
Cash revenues
Annual membership fees	$	850,000	$	614,000
Lesson and class fees		486,200		374,000
Miscellaneous		5,400		4,400
Total cash received	$	1,341,600	$	992,400
Cash costs
Manager’s salary and benefits	$	86,000	$	86,000
Regular employees’ wages and benefits		394,000		394,000
Lesson and class employees’ wages and benefits		404,000		314,000
Supplies		34,800		33,800
Utilities (heat and light)		46,800		32,800
Mortgage interest		49,000		54,800
Miscellaneous		5,400		4,400
Total cash costs	$	1,020,000	$	919,800
Cash income	$	321,600	$	72,600

Additional Information

Other financial information as of October 31, year 9:
1. Cash in checking account, $21,000.
2. Petty cash, $1,300.
3. Outstanding mortgage balance, $888,000.
4. Accounts payable for supplies and utilities unpaid as of October 31, year 9, and due in November, year 9, $6,400.
The club purchased $64,000 worth of sailing equipment during the current fiscal year (ending October 31, year 9). Cash of $34,000 was paid on delivery, with the balance due on October 1, which had not been paid as of October 31, year 9.
The club began operations in year 3 in rental quarters. In October, year 5, it purchased its current property (land and building) for $1,452,000, paying $268,000 down and agreeing to pay $74,000 plus 5 percent interest annually on the previously unpaid loan balance each November 1, starting November 1, year 6.
Membership rose 3 percent during year 9, approximately the same annual rate of increase the club has experienced since it opened and that is expected to continue in the future.
Membership fees were increased by 13 percent in year 9. The board has tentative plans to increase them by 12 percent in year 10.
Lesson and class fees have not been increased for three years. The number of classes and lessons has grown significantly each year; the percentage growth experienced in year 9 is expected to be repeated in year 10.
Miscellaneous revenues are expected to grow in year 10 (over year 9) at the same percentage as experienced in year 9 (over year 8).
Lesson and class employees’ wages and benefits will increase to $611,650. The wages and benefits of regular employees and the manager will increase 13 percent. Equipment depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 17 percent.

Cash revenue
Beginning cash balance (including petty cash)
Annual membership fees
Lesson and class fees
Miscellaneous
CORTEZ BEACH YACHT CLUB
Budgeted Statement of Income (Cash Basis)
For the Year 10
Total cash received
Cash costs
Manager's salary and benefits
Regular employees' wages and benefits
Lesson and class employee wages and benefits
Supplies
Utilities
Miscellaneous
Mortgage payment
Total cash expenses
Cash income
Additional Cash Flows
Cash payments:
Total cash payments
Cash available for working capital and to acquire property
S
S
S
S
S
S
22,300
22,300
0
22,300
0
0

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