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.
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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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