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 $69,000 of new equipment each year and wants to begin a fund to purchase a $619,000 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.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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 $69,000 of new equipment each year and wants to begin a fund to purchase a $619,000 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 | $ 900,000 | $ 619,000 |
| Lesson and class fees | 492,700 | 379,000 |
| Miscellaneous | 5,900 | 4,900 |
| Total cash received | $ 1,398,600 | $ 1,002,900 |
| Cash costs | ||
| Manager’s salary and benefits | $ 91,000 | $ 91,000 |
| Regular employees’ wages and benefits | 399,000 | 399,000 |
| Lesson and class employees’ wages and benefits | 409,000 | 319,000 |
| Supplies | 35,800 | 34,800 |
| Utilities (heat and light) | 47,800 | 33,800 |
| Mortgage interest | 55,200 | 62,800 |
| Miscellaneous | 5,900 | 4,900 |
| Total cash costs | $ 1,043,700 | $ 945,300 |
| Cash income | $ 354,900 | $ 57,600 |
Additional Information
-
Other financial information as of October 31, year 9:
- Cash in checking account, $23,500.
- Petty cash, $1,550.
- Outstanding mortgage balance, $948,000.
- Accounts payable for supplies and utilities unpaid as of October 31, year 9, and due in November, year 9, $6,900.
- The club purchased $69,000 worth of sailing equipment during the current fiscal year (ending October 31, year 9). Cash of $39,000 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 $1,542,000, paying $278,000 down and agreeing to pay $79,000 plus 6 percent interest annually on the previously unpaid loan balance each November 1, starting November 1, year 6.
- Membership rose 4 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 18 percent in year 9. The board has tentative plans to increase them by 10 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 $614,150. The wages and benefits of regular employees and the manager will increase 18 percent. Equipment
depreciation and supplies, utilities, and miscellaneous expenses are expected to increase 22 percent.
Required:
-
Construct a
cash budget for year 10 for Cortez Beach Yacht Club.Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar amounts.
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