Question P3-7
By:
Arash Foroudi
Becky Truax
Julio Perez
Ken Chen
Question
Cedar Fair, L. P. (Limited Partnership) owns and
operates four seasonal amusement parks:
Cedar Point in Ohio, Valleyfair near
Minneapolis/St. Paul, Dorney Park and
Wildwater Kingdom near Allentown,
Pennsylvania, and Worlds of Fun/Oceans of
Fun in Kansas City. The following are
summarized transactions similar to those that
occurred in a recent year (assume 2008):
Requirements
1.) For each of these transactions, record journal entries.
Use the letter of each transaction as its reference. Note
that transaction (d) will require 2 entries, one for
revenue recognition and one for the related expense.
2.) Use the following chart to identify whether each
transaction results in a cash flow effect from operating
(O), investing (I), or financing (F) activities, and indicate
the direction and amount of the effect on cash (+ for
increase and
- for decrease). If there is no cash flow effect, write none.
The first transaction is provided as an example.
(a) Guests at the parks paid $89,664,000 cash in admissions.
Cash (A)+
89,664,000
Admissions Revenue (+R,+SE)
(R2) Operating
89,664,000
+89,664,000
(b) The primary operating expenses (such as employee wages,
utilities, and repairs and maintenance) for the year were $66,347,000
with $60,200,000 paid in cash and the rest on account.
Primary Operations Expense (-E,-SE)
66,347,000
Cash (-A)
60,200,000
Account payable (+L)
(R2) Operating
6,147,000
-60,200,000
(c) Interest paid on long term debt was $6,601,000
Interest Expense (+E,-SE)
6,601,000
Cash (-A)
(R2) Operating
6,601,000
-6,601,000
(d) The parks sell food and merchandise and operate games. The cash
received during the year for these combined activities was
$77,934,000. The cost of the merchandise sold during the year was
$19,525,000.
Cash (A)+
77,934,000
Food, Merchandise, and
Games Revenue (+R,+SE)
Cost of Goods Sold (+E,-SE)
77,934,000
19,525,000
Food, Merchandise
Inventory (A-)
(R2) Operating
19,525,000
+77,934,000
(e) Cedar Fair purchased and built additional buildings, rides, and
equipment during the year, paying $23,813,000 in cash.
Equipment and Building (A+)
23,813,000
Cash (-A)
(R2) Investing
23,813,000
-23,813,000
(f) The most significant assets for the company are land, buildings, rides, and
equipment. Therefore, a large expense for Cedar Fair is depreciation expense
(related to using these assets to generate revenues during the year). For the
year, the amount was $14,473,000 (credit Accumulated Depreciation)
Depreciation Expense (+E,-SE)
Accumulated Depreciation (-A)
(R2) None
14,473,000
14,473,000
(g) Guests may stay in the parks at accommodations owned by the
company. During the year, Accommodations Revenue was $11,345,000;
$11,010,000 was paid by the guests in cash and the rest was owed on
account.
Cash (A)+
11,010,000
Account Receivable (A+)
335,000
Accommodations Revenue (+R,+SE)
(R2) Operating
+11,010,000
11,345,000
(h) Cedar Fair paid $2,900,000 principal on notes payable.
Note Payable (-L)
2,900,000
Cash (-A)
(R2) Financing
2,900,000
-2,900,000
(i) The company purchased $19,100,000 in food and merchandise
inventory for the year, paying $18,000,000 in cash and owing the rest
on account.
Inventory (A+)
19,100,000
Cash (A-)
18,000,000
Account Payable (+L)
(R2) Operating
1,100,000
-18,000,000
(j) The selling, general, and administrative expenses such as the president’s
salary and advertising for the parks, classified as operating expenses, for the
year were $21,118,000; $19,500,000 was paid in cash, and the rest was owed on
account.
Selling, general, and administrative
Expense (+E,-SE)
21,118,000
Cash (A-)
19,500,000
Account Payable (+L)
(R2) Operating
1,618,000
-19,500,000
(k) Cedar Fair paid $8,600,000 on accounts payable during the year.
Account Payable (L-)
8,600,000
Cash (A-)
(R2) Operating
8,600,000
-8,600,000