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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?

Guests pay one night’s stay in advance. On receiving the advance: Dr Cash 220, Cr Advance room rental revenue 220 (liability a/c).

When the guest has stayed there and checked out: Dr Advance roon rental revenue 220, Cr Room rental revenue 220 (revenue a/c).

Assuming a/cs are updated by Ritz Manor once a week, Dr a/cs receivable (Vendalite Co) 216 ($720 x 30%) Cr Vending machine revenue 216.

At the end of the quarter, the a/cs receivable a/c (Vendalite) would have accumulated 13 weeks x 216 or 2808. When Ritz Manor receives the check from Vendalite, it'll know the exact amount, so an adjusting entry will be necessary to recognize the overs or unders, for e.x. if the check is for 2850, the entry is
Dr Cash 2850 Cr A/cs receivable (Vendalite) 2808 Cr Vending machine revenue 42.

This is because the $720 per week is only an estimated amount, so 30% of this ($216) is also an estimated amount. Once a quarter upon receiving the check from Vendalite, Ritz will know the exact amount.

To determine the type of adjusting entries the Ritz Manor has, you need to analyze the provided information. In this case, the Ritz Manor is entitled to 30% of the revenue from the vending machines operated by Vendalite Company. However, Vendalite sends a check to the Ritz Manor once at the end of each quarter for the resort's share of the revenue.

From this information, it can be inferred that the Ritz Manor needs to record an adjusting entry to recognize their revenue from the vending machines for the duration of the quarter. This entry is required to accurately reflect the earnings in their financial statements since revenue will be received at a later date.

The amount of this adjustment is determined based on the average weekly revenue from the vending machines, which is $720. Since the Ritz Manor is entitled to 30% of this revenue, the amount can be calculated as follows: $720 * 30% = $216. This $216 represents the Ritz Manor's share of the revenue earned during a week.

The accounts affected by this adjusting entry would typically be:

1. Revenue from Vending Machines: This is an income account that represents the revenue earned from the vending machines. The Ritz Manor would record their share of the revenue in this account.

2. Accounts Receivable: This is an asset account that represents the amount owed to the Ritz Manor by Vendalite Company for their share of the revenue. The Ritz Manor would record this amount as a receivable until the check is received.

3. Sales Revenue: This account represents the revenue earned by the Ritz Manor from their main business operations, such as room rentals. It would not be affected by the adjusting entry for vending machine revenue.

Please note that the exact accounts and terminology used might differ depending on the specific accounting system and chart of accounts used by the Ritz Manor.