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    Master Budget Development Estimated

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    The Garden Hotel is in the process of developing a master budget and pro-forma financial statements. The beginning balance sheet is estimated to be:

    Garden Hotel
    Estimated Balance Sheet

    Cash $20,000 Accounts Payable $20,000
    Accounts Receivable $30,000 Notes Payable $500,000
    Facilities $3,010,000 Capital Stock $100,000
    Accumulated Depreciation ($1,100,000) Retained Earnings $1,340,000

    Total Assets $1,960,000 Total Liabilities and Equity $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 amount is expected to be $30,000.

    a. Prepare the expected income statement.
    b. Prepare (in good form) the expected cash flow statement.
    c. Prepare the expected balance sheet.

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    Solution Summary

    The master budget development estimation is examined.

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