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Question P3-7

Question P3-7. By: Arash Foroudi Becky Truax Julio Perez Ken Chen. Question.

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Question P3-7

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  1. Question P3-7 By: Arash Foroudi Becky Truax Julio Perez Ken Chen

  2. 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):

  3. 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.

  4. (a) Guests at the parks paid $89,664,000 cash in admissions. (R2) Operating +89,664,000

  5. (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. (R2) Operating -60,200,000

  6. (c) Interest paid on long term debt was $6,601,000 (R2) Operating -6,601,000

  7. (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. (R2) Operating +77,934,000

  8. (e) Cedar Fair purchased and built additional buildings, rides, and equipment during the year, paying $23,813,000 in cash. (R2) Investing -23,813,000

  9. (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) (R2) None

  10. (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. (R2) Operating +11,010,000

  11. (h) Cedar Fair paid $2,900,000 principal on notes payable. (R2) Financing -2,900,000

  12. (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. (R2) Operating -18,000,000

  13. (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. (R2) Operating -19,500,000

  14. (k) Cedar Fair paid $8,600,000 on accounts payable during the year. (R2) Operating -8,600,000

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