I am having trouble with this can someone please help me? Thank You
Post your response to the following: 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.
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, there are a few types of adjusting entries that the Ritz Manor may have:
1. Accrued Revenue: Since the Ritz Manor is entitled to 30% of the revenue from the vending machines, they need to adjust their accounts to recognize revenue that has been earned but not yet received. This requires an adjusting entry to recognize the revenue owed to them.
2. Accrued Expenses: The Ritz Manor may also need to make an adjusting entry for any expenses that have been incurred but not yet paid. For example, Vendalite sends a check to the Ritz Manor once at the end of each quarter, so the resort needs to adjust their accounts to recognize the expense owed to Vendalite for the resort's share of the revenue.
The amounts of these adjustments are determined based on the specific terms and conditions mentioned in the information provided. For example, the total average weekly revenue from the vending machines is $720, and the Ritz Manor is entitled to 30% of this revenue. Therefore, the amount of accrued revenue for the Ritz Manor can be calculated as $720 multiplied by 30%, which is $216.
The accounts that are affected by these adjusting entries would include:
1. Accrued Revenue: This would increase a revenue account (e.g., Vending Machine Revenue) and create a corresponding receivable account (e.g., Accrued Vending Machine Revenue) on the balance sheet.
2. Accrued Expenses: This would increase an expense account (e.g., Vending Machine Expense) and create a corresponding payable account (e.g., Accrued Vending Machine Expense) on the balance sheet.
It's worth noting that the specific accounts affected may vary depending on the company's chart of accounts and accounting practices. Therefore, it's always best to consult with the Ritz Manor's specific financial statements and accounting policies to determine the exact accounts that would be affected by these adjusting entries.