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Ritz Manor Adjusting Entries

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The Ritz Manor is a popular seaside resort. A double room costs $220 for one night. In order to reserve a room, guests must pay one night's stay in advance. On each floor of the hotel, Vendalite Company operates vending machines with energy bars, juices, and other snacks for guests. Vendalite stocks the machines and collects revenue every week. Total average weekly revenue from these machines is $720. The Ritz Manor is entitled to 30% of the revenue from the machines. Vendalite sends a check to the Ritz Manor once at the end of each quarter for the resort's
share of the revenue.

Based on this information, what type of adjusting entries does the Ritz Manor have?

How are the amounts of these adjustments determined?

Which accounts are affected?

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Solution Preview

The Ritz Manor has two types of adjusting entries: Deferrals and Accruals.

Deferrals are adjusting entries for revenues and expenses that are matched to a date after the transaction has occurred and been recorded. Guests have to pay the room board before they spend the night, so that is an accrual. It does not get transferred to revenue until after the night has passed. The amount for the adjustment is determined by the amount the guest paid. For example, Mr. Xavier wants to make a reservation for 2 ...

Solution Summary

Ritz Manor Adjusting Entries