The Ritz Manor is a popular seaside resort. A double room costs $220 for one night. 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.

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

o How are the amounts of these adjustments determined?

o Which accounts are affected?

Based on the information provided, the Ritz Manor has two types of adjusting entries:

1. Accrued Revenue: The Ritz Manor is entitled to a share of the revenue from the vending machines operated by Vendalite. Since Vendalite sends a check to the Ritz Manor once at the end of each quarter, the revenue needs to be recognized and recorded in the respective accounting period. To make this adjustment, the Ritz Manor would recognize and record the revenue it is entitled to, based on the percentage agreed upon (30% of the total average weekly revenue).

2. Unearned Revenue: Guests at the Ritz Manor are required to pay one night's stay in advance when reserving a room. The amount received in advance from these guests is initially recorded as unearned revenue. As each night passes, a portion of the unearned revenue needs to be recognized and recorded as earned revenue. To make this adjustment, the Ritz Manor would determine the amount of revenue that has been earned based on the number of nights stayed by the guests.

The amounts of these adjustments are determined as follows:

- For the accrued revenue, the Ritz Manor would calculate 30% of the total average weekly revenue generated by the vending machines.

- For the unearned revenue, the Ritz Manor would determine the portion of the advance payments that corresponds to the number of nights stayed by the guests during the accounting period.

The affected accounts for these adjusting entries would be:

1. Accrued Revenue:
- Credit the Accrued Revenue account (increasing revenue)
- Debit the Revenue Receivable account (increasing the amount owed by Vendalite)

2. Unearned Revenue:
- Debit the Unearned Revenue account (decreasing liabilities)
- Credit the Revenue account (increasing revenue)