Hospitality Accounting Ch. 2

Costs of outside laundry and dry-cleaning costs applicable to the Rooms Department.

Laundry and Dry Cleaning

The cost of reservation services including telephone, teletype, reservation computer, and any telecommunications expenditures that can be directly related to the Rooms Department.

Reservation Expense

The collection, summarization, and reporting of financial information about various decision centers throughout an organization.

Responsibility Accounting

If inventory is updated periodically, which of the equations is correct?

Cost of goods sold = Beginning inventory + Purchases − Ending inventory

Which of the following is not an expense account associated with the food and beverage department?

Credit card commissions

The cost of items consumed in the process of generating revenue or that expire due to the passage of time. Examples include cost of sales, payroll, taxes, supplies, advertising, utilities, repairs, rent, depreciation, and other operating and fixed expenses.

Expenses

Repairs to an oven located in the restaurant are charged to the F&B department.

False

The income statement approach to estimating bad debts requires an adjusting entry at the end of the period to reduce receivables to net realizable value.

False

Using a perpetual inventory system, the purchase of inventory is recorded with a debit to the Purchases account.

False

A ___________ cost does not change in proportion to changes in the volume of activity.

Fixed

Expenses incurred regardless of sales volume of the hotel. Examples include rent, property insurance, interest, depreciation, and amortization.

Fixed Charges

The cost of food used in the production of a menu item; the cost of food served to guests in the revenue process.

Food Cost

Which of the following costs is not included as inventory on the balance sheet?

Freight-out costs for finished goods sent to retailers.

Which of the following is merchandise inventory?

Goods held for sale in the normal course of business

Expenses that cannot be related directly to any specific department that benefit the hotel as a whole.

Indirect Expenses

Ace Restaurants purchased food inventory on account. The inventory costs $2,000 and is expected to sell for $3,000. How should Ace record the purchase using a perpetual inventory system?

Inventory 2000 Accounts Payable 2000

Calistoga Produce estimates bad debt expense at ½% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2015. During 2016, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.

$1,575

The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to:

have no effect on total assets or total equity.

Each type of deduction made from the employees' earnings is recorded in a separate

liability account

When received from guests, nonbank credit card drafts are:

recorded as accounts receivable.

It is best not to pay wages and salaries by

cash

Axle Inc. updates its inventory perpetually. Its beginning inventory is $35,000, goods purchased during the period cost $120,000, and the cost of goods sold for the period is $140,000. What is the amount of the ending inventory?

$15,000

Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $80,000 of revenue on account during 2013. During 2013, Hailey collected $64,000 of cash from its receivable's accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, 2013 balance sheet would be:

$15,200

Acme, Inc. had cost of goods sold of $2,000. If beginning inventory was $2,100 and ending inventory was $500, Acme's purchases must have been:

$400

During the week ended April 26, 2016, Andy Tyler worked 40 hours. His regular hourly rate is $15. Assume that his earnings are subject to social security tax at a rate of 6.2 percent and Medicare tax at a rate of 1.45 percent. He also has deductions of $31 for federal income tax and $21 for health insurance.

$600.00

A method for estimating and recording bad debts before they are actually incurred.

Allowance Method

A contra-asset account providing an estimate of total potential bad debts. On the balance sheet, this amount is deducted from Accounts Receivable to show the amount expected to be collected in the future.

Allowance for Doubtful Accounts

The separation of areas into specific areas of responsibility beginning at the top of the organization and may have several levels.

Business Segmentation

Identify the list of accounts below that would normally all have a debit balance.

Cash, Salaries Expense, Insurance Expense

Costs of contracting outside companies to clean areas of the Rooms Department. This may include washing windows, exterminating pests, and disinfecting.

Contract Cleaning

A general ledger account required for each merchandising center of a hotel containing the costs of items sold.

Cost of Goods Sold

When a company sells goods, it removes their cost from the balance sheet and reports the cost on the income statement as:

Cost of Goods Sold

A fixed cost:

Does not change with changes in the volume of activity within the relevant range.

If inventory is updated perpetually, which of the equations is correct?

Ending inventory = Beginning inventory + Purchases − Cost of goods sold

On May 1, Ace Restaurants bought food inventory costing $2,000 on account with terms 2/10, n/30. On May 18, Ace pays for this inventory and records which of the following using a periodic inventory system?

Option a.

The employer records the amount of federal income taxes withheld from employees in the _________ __________ - FWT general ledger account.

Taxes Payable Response Feedback:[None Given]

Which of the following is not classified as a support center within a hospitality business?

Telecommunications

A periodic inventory system does not continually modify inventory amounts, but instead adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand.

True

Contracting with an outside maintenance company to clean the restaurant is charged to the F&B department.

True

Country Charm Restaurant is open 24 hours a day and always has a fire going in the fireplace in the middle of its dining area. The cost of the firewood for this fire is fixed with respect to the number of meals served at the restaurant.

True

The expense for water used by registered guests is charged to the rooms department.

True

The payroll expense for housekeepers is charged to the rooms department.

True

The salary of the general manager is charged to the A&G department.

True

The employer records the amount of federal income tax withheld as:

a liability