Hospitality
Industry Financial
Accounting with
Answer Sheet
(AHLEI) 4e
Raymond Schm
(Solutions Manual All
Chapters)
, Introduction to Accounting 5
Introduction to Accounting
NAME: ________________________________________
DATE: ____________________
1. Which of the following events would be recorded as an accounting event?
a. A guest enters the dining room and is seated by a host.
b. A guest complains to front office representatives about a dirty guestroom.
c. A valet parks a guest’s vehicle.
d. A guest purchases a meal in a food outlet.
2. The branch of accounting that involves reviewing and evaluating documents, records, and control systems is
called:
a. financial accounting.
b. cost accounting.
c. managerial accounting.
d. auditing.
3. Which of the following groups has the most influence over the development of accounting principles in the
private sector?
a. Financial Accounting Standards Board (FASB)
b. Securities and Exchange Commission (SEC)
c. Internal Revenue Service (IRS)
d. Hospitality Financial and Technology Professionals (HFTP)
4. The organization that administers the certification programs for Certified Hotel Account Executives and
Certified Hotel Technology Professionals is:
a. the Internal Revenue Service (IRS).
b. the Securities and Exchange Commission (SEC).
c. Hospitality Financial and Technology Professionals (HFTP).
d. the Financial Accounting Standards Board (FASB).
5. The major disadvantage of the corporate form of business organization is:
a. double taxation.
b. limited liability.
c. difficulty in raising capital.
d. all of the above.
6. Regardless of the size of an operation’s accounting department, the diversity of its responsibilities, or the
number and types of reports produced, the accounting staff is responsible for providing:
a. service.
b. clean rooms that are ready for sale.
c. inventory counts.
d. guest comment cards.
7. The generally accepted accounting principle of matching requires that:
a. accounting adjustments be made at least quarterly.
b. balance sheet accounts and income statement accounts match.
c. expenses be matched with the revenues they generate.
d. hospitality businesses use the cash basis of accounting.
,6 Introduction to Accounting
8. The Tech Hotel purchased a computer for $3,000. The retail value of the computer per the salesperson is
$3,500; however, it is projected that the computer will have a market value of only $2,500 one year from now.
The cost principle dictates that the computer purchase be recorded at the date of purchase for:
a. $2,500.
b. $3,000.
c. $3,500.
d. cannot be determined
9. Which of the following statements best describes the accounting principle of objective evidence?
a. It requires supporting documents for accounting transactions whenever possible.
b. It involves recording, classifying, and summarizing transactions in order to prepare reports.
c. It requires that all events that would make a difference to the user of a financial report be accounted for.
d. It assumes that the business will survive for the foreseeable future.
10. What happens to the fundamental accounting equation when the sole proprietor of a business invests more cash
in it?
a. Assets increase, liabilities increase, and owner’s equity decreases.
b. Assets increase, liabilities remain the same, and owner’s equity increases.
c. Assets remain the same, liabilities increase, and owner’s equity increases.
d. Assets increase, liabilities increase, and owner’s equity remains the same.
, Introduction to Accounting 7
Extra Problems
Problem 1
Fill in the blanks below with the accounting principle that best applies.
a. Cost c. Going Concern
b. Business Entity d. Unit of Measurement
e. Objective Evidence h. Matching
f. Full Disclosure i. Conservatism
g. Consistency j. Materiality
1. A lodging company pays a fire insurance premium of $40,000. The policy covers a two-year period. The $40,000
cash disbursement is recorded as insurance expense. This violates the _______ principle.
2. A guestroom wastebasket costing $20 is expensed when it is purchased. The wastebasket should have a five-year life.
This is probably acceptable accounting because of the _______ principle.
3. The food inventory is generally valued at its cost at the end of each year. However, this year it is written down at its
market value because the market value is less than cost. The valuing of food inventory at the lower of cost or market
is according to the _______ principle.
4. A. Dogg, the proprietor of Dogg’s Dining, takes a few steaks home from his business. He records the cost of the
steaks taken for personal use as “A. Dogg, Drawing” in accordance with the _______ principle.
5. The Yorkshire Hotel, in addition to including its depreciation expense on the income statement, mentions its method
of depreciation and the estimated lives of its property and equipment in a footnote. This is based on the _______
principle.
Problem 2
The following are account names in the ledger of Ray’s Roadhouse:
Notes Payable _________ Prepaid Rent _________
Equipment _________ Ray Brock, Capital _________
Accounts Payable _________ Accounts Receivable _________
Operating Supplies _________ Cash _________
Wages Payable _________ Roadhouse Roadster (Delivery Van) _________
Required:
In the blanks above, indicate whether each account should be classified as an asset, liability, or owner’s equity account.
Problem 3
Duane Schmidt opened a small café, which he called Schmidt’s Café. During the first week, he completed the following
transactions:
a. Sold a personal investment in Fork Motor Co. stock and deposited $100,000 of the proceeds in a bank account
opened in the name of Schmidt’s Café.
b. Purchased an old building converted into the café for $85,000.
c. Purchased food and beverages for $3,000 on account from Jerry’s Wholesale Food Co.
d. Sold meals for $150 total cash to Randall Construction Co. The entire amount was paid by Jim Randall. The cost of
the food and beverages sold was $50.
e. Paid the cook $50 for one day’s work.
Required:
1. Arrange the following asset, liability, and proprietorship titles in an expanded accounting equation like that shown in
the chapter: Cash, Food and Beverage Inventory, Building, Accounts Payable (Jerry’s Wholesale Food Co.), Duane
Schmidt, Capital.
2. Show by additions and subtractions the effects of each transaction on the assets, liabilities, and proprietorship of
Schmidt’s Cafe. Show net totals for all items after each transaction.
