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Questions
    Please answer at least 7 or 8 of the following questions:
    1.    Which monthly and annual variances on the income statement require input from the onsite property management team? What are examples of questions you would ask for those line items?
    2.    Based upon the information provided can you identify any additional accruals that are needed? If yes, what entry needs to be recorded?
    3.    Based upon the information provided can you identify any additional amortization entries that are needed? If yes, what entry needs to be recorded?
    4.    Based upon the information provided, would you have any questions on any of the balance sheet accounts?
    5.    Do you have any overall questions or concerns when looking at the balances in the trial balance?
    6.    Based upon the information provided, what is the interest rate on the mortgage payable?
    7.    What journal entry(s) will you record if the real estate tax bill is paid in period 09/20 (assuming that the payment covers a period of 6 months)?
    8.    What journal entry(s) will you record if the real estate tax bill is paid in period 10/20 (assuming that the payment covers a period of 6 months)?
    9.    Do you expect there will be sufficient cash on hand to pay for the real estate tax bill in period 09/20 or 10/20? Explain why or why not.
    10.    What journal entry(s) will you record if the insurance bill is paid in period 09/20 (assuming that the payment covers a period of 12 months)?
    11.    Prepare a balance sheet using the information provided.
    12.    If you were auditing the books, what accounts would you highlight for further testing? For which accounts would you request more detailed back-up and why?
    13.    What are this company's largest sources of income and expenses?
    14.    How is this company doing financially? Is the net worth increasing or decreasing? How can you tell?
    15.    Are there any additional questions, concerns or comments you may have after looking through the financial statements and schedules?
Income Statement
    Comparative Income Statement
    Income Statement by Account Category
    Accrual
        Report includes an open period. Entries are not final.
        Cu
ent Period                Comments    Year-To-Date                Comments
        Actual    Budget            Category variances over 10% and $2,500 on a monthly basis.    Actual    Budget            Category variances over 10% and $10,000 on an annual basis.
    Thru:    Aug 2020    Aug 2020    Variance            Aug 2020    Aug 2020    Variance
    INCOME
    OFFICE RENTS
    Base Rent    2,500,000.00    2,500,000.00    0.00    0.00%        20,000,000.00    20,000,000.00    0.00    0.00%
    Pass Thru -Op Expense    65,000.00    75,000.00    (10,000.00)    -13.33%        520,000.00    600,000.00    (80,000.00)    -13.33%
    Pass Thru -Real Est Taxes    150,000.00    225,000.00    (75,000.00)    -33.33%        1,200,000.00    1,800,000.00    (600,000.00)    -33.33%
    Straight-Line Rent    (100,000.00)    (100,000.00)    0.00    0.00%        (800,000.00)    (800,000.00)    0.00    0.00%
    TOTAL OFFICE RENTS    2,615,000.00    2,700,000.00    (85,000.00)    -3.15%        20,920,000.00    21,600,000.00    (680,000.00)    -3.15%
    RETAIL RENTS
    Retail Base Rent    25,000.00    30,000.00    (5,000.00)    -16.67%        200,000.00    240,000.00    (40,000.00)    -16.67%
    Common Area Maintenance    1,500.00    1,500.00    0.00    0.00%        12,000.00    12,000.00    0.00    0.00%
    Reimbursement - Tax    5,000.00    5,000.00    0.00    0.00%        40,000.00    40,000.00    0.00    0.00%
    Rent Abatements    (10,000.00)    0.00    (10,000.00)    100.00%        (10,000.00)    0.00    (10,000.00)    100.00%
    TOTAL RETAIL RENTS    21,500.00    36,500.00    (15,000.00)    -41.10%        242,000.00    292,000.00    (50,000.00)    -17.12%
    PARKING
    Parking - Contract    85,000.00    87,000.00    (2,000.00)    -2.30%        680,000.00    696,000.00    (16,000.00)    -2.30%
    TOTAL PARKING    85,000.00    87,000.00    (2,000.00)    -2.30%        680,000.00    696,000.00    (16,000.00)    -2.30%
    ADDITIONAL TENANT SERVICE INCOME
    Electricity Reimbursement    15,000.00    30,000.00    (15,000.00)    -50.00%        120,000.00    240,000.00    (120,000.00)    -50.00%
    TOTAL ADDITIONAL TENANT SERVICE INCOME    15,000.00    30,000.00    (15,000.00)    -50.00%        120,000.00    240,000.00    (120,000.00)    -50.00%
    TOTAL INCOME    2,736,500.00    2,853,500.00    (117,000.00)    -4.10%        21,962,000.00    22,828,000.00    (866,000.00)    -3.79%
    EXPENSES
    CLEANING
    Contract Cleaning Service    85,000.00    50,000.00    35,000.00    70.00%        680,000.00    280,000.00    400,000.00    142.86%
    Day Porte
Matron    30,000.00    20,000.00    10,000.00    50.00%        240,000.00    160,000.00    80,000.00    50.00%
    Trash Removal    2,500.00    5,000.00    (2,500.00)    -50.00%        20,000.00    40,000.00    (20,000.00)    -50.00%
    TOTAL CLEANING    117,500.00    75,000.00    42,500.00    56.67%        940,000.00    480,000.00    460,000.00    95.83%
    REPAIRS & MAINTENANCE
    Payroll - Maintenance    23,000.00    25,000.00    (2,000.00)    -8.00%        200,000.00    200,000.00    0.00    0.00%
    Elevator Service Contract    0.00    5,500.00    (5,500.00)    -100.00%        38,500.00    44,000.00    (5,500.00)    -12.50%
    Elevator R & M    25,000.00    500.00    24,500.00    4900.00%        25,000.00    30,000.00    (5,000.00)    -16.67%
    HVAC R & M    0.00    10,000.00    (10,000.00)    -100.00%        25,000.00    80,000.00    (55,000.00)    -68.75%
    Electrical    500.00    100.00    400.00    400.00%        18,500.00    20,000.00    (1,500.00)    -7.50%
    Plumbing R & M Contract    500.00    500.00    0.00    0.00%        4,000.00    4,000.00    0.00    0.00%
    Plumbing R & M    0.00    750.00    (750.00)    -100.00%        0.00    750.00    (750.00)    -100.00%
    Fire & Safety R & M    0.00    25,000.00    (25,000.00)    -100.00%        0.00    25,000.00    (25,000.00)    -100.00%
    Pest Control Contract    150.00    150.00    0.00    0.00%        1,350.00    1,200.00    150.00    12.50%
    Interior Plant Mntnce    10,000.00    5,000.00    5,000.00    100.00%        45,000.00    40,000.00    5,000.00    12.50%
    Interior Painting    0.00    0.00    0.00    0.00%        22,000.00    20,000.00    2,000.00    10.00%
    Other Exterior Repairs    0.00    0.00    0.00    0.00%        500.00    25,000.00    (24,500.00)    -98.00%
    TOTAL REPAIRS & MAINTENANCE    59,150.00    72,500.00    (13,350.00)    -18.41%        379,850.00    489,950.00    (110,100.00)    -22.47%
    UTILITIES
    Electricity    150,000.00    100,000.00    50,000.00    50.00%        1,200,000.00    800,000.00    400,000.00    50.00%
    Wate
Sewer    15,000.00    20,000.00    (5,000.00)    -25.00%        155,000.00    160,000.00    (5,000.00)    -3.13%
    TOTAL UTILITIES    165,000.00    120,000.00    45,000.00    37.50%        1,355,000.00    960,000.00    395,000.00    41.15%
    ROADS/ GROUNDS
    Landscaping Contract    0.00    1,500.00    (1,500.00)    -100.00%        10,500.00    12,000.00    (1,500.00)    -12.50%
    Snow Removal    0.00    0.00    0.00    0.00%        0.00    5,000.00    (5,000.00)    -100.00%
    TOTAL ROADS/ GROUNDS    0.00    1,500.00    (1,500.00)    -100.00%        10,500.00    17,000.00    (6,500.00)    -38.24%
    ADMINISTRATIVE
    Payroll - Office    15,000.00    17,000.00    (2,000.00)    -11.76%        120,000.00    125,000.00    (5,000.00)    -4.00%
    Management Fees    (25,000.00)    25,000.00    (50,000.00)    -200.00%        150,000.00    200,000.00    (50,000.00)    -25.00%
    Legal & Professional Fees    125,000.00    0.00    125,000.00    100.00%        125,000.00    5,000.00    120,000.00    2400.00%
    Telephone/Pager    500.00    500.00    0.00    0.00%        4,000.00    4,000.00    0.00    0.00%
    Computer Hardware/Sftwre    1,500.00    1,750.00    (250.00)    -14.29%        12,000.00    14,000.00    (2,000.00)    -14.29%
    Office Supplies    50.00    50.00    0.00    0.00%        400.00    400.00    0.00    0.00%
    TOTAL ADMINISTRATIVE    117,050.00    44,300.00    72,750.00    164.22%        411,400.00    348,400.00    63,000.00    18.08%
    FIXED EXPENSES
    Real Estate Taxes    0.00    1,000,000.00    (1,000,000.00)    -100.00%        5,250,000.00    8,000,000.00    (2,750,000.00)    -34.38%
    Insurance    0.00    7,500.00    (7,500.00)    -100.00%        52,500.00    60,000.00    (7,500.00)    -12.50%
    TOTAL FIXED EXPENSES    0.00    1,007,500.00    (1,007,500.00)    -100.00%        5,302,500.00    8,060,000.00    (2,757,500.00)    -34.21%
    TOTAL OPERATING EXPENSES    458,700.00    1,320,800.00    (862,100.00)    -65.27%        8,399,250.00    10,355,350.00    (1,956,100.00)    -18.89%
    NET OPERATING INCOME (LOSS)    2,277,800.00    1,532,700.00    745,100.00    48.61%        13,562,750.00    12,472,650.00    1,090,100.00    8.74%
    NON-OPERATING EXPENSES
    Mortgage Interest    250,000.00    250,000.00    0.00    0.00%        2,250,000.00    2,000,000.00    250,000.00    12.50%
    TOTAL NON-OPERATING EXPENSES    250,000.00    250,000.00    0.00    0.00%        2,250,000.00    2,000,000.00    250,000.00    12.50%
    NET INCOME (LOSS)    2,027,800.00    1,282,700.00    745,100.00    58.09%        11,312,750.00    10,472,650.00    840,100.00    8.02%
Trial Balance
    Account    Debit        Credit
    Cash - Operating            100,000.00
    A/R - Billed    4,500,000.00
    A/R - S/L Rent    10,000,000.00
    A/R - Other            50,000.00
    Defe
ed Leasing Comm    150,000.00
    Building Improvements    250,000.00
    Tenant Improvements    500,000.00
    Land Improvements    25,000.00
    Building Equipment    350,000.00
    Prepaid Real Estate Tax    0.00
    Prepaid Expenses    5,500.00
    Accounts Payable            57,000.00
    Accrued Expenses    1,500.00
    Accrued Interest            250,000.00
    Accrued RE Taxes            2,250,000.00
    Accrued Insurance Payable            0.00
    Security Deposits            75,000.00
    Prepaid Rent    500.00
    Mortgage Payable            50,000,000.00
    Contributions            1,360,000.00
    Distributions    75,000,000.00
    Retained Earnings            24,527,750.00
    Base Rent            20,000,000.00
    Pass Thru -Op Expense            520,000.00
    Pass Thru -Real Est Taxes            1,200,000.00
    Retail Base Rent            200,000.00
    Common Area Maintenance            12,000.00
    Reimbursement - Tax            40,000.00
    Rent Abatements    10,000.00
    Parking - Contract            680,000.00
    Electricity Reimbursement            120,000.00
    Contract Cleaning Service    680,000.00
    Day Porte
Matron    240,000.00
    Trash Removal    20,000.00
    Payroll - Maintenance    200,000.00
    Elevator Service Contract    38,500.00
    Elevator R & M    25,000.00
    HVAC R & M    25,000.00
    Electrical    18,500.00
    Plumbing R & M Contract    4,000.00
    Plumbing R & M    0.00
    Fire & Safety R & M    0.00
    Pest Control Contract    1,350.00
    Interior Plant Mntnce    45,000.00
    Interior Painting    22,000.00
    Other Exterior Repairs    500.00
    Electricity    1,200,000.00
    Wate
Sewer    155,000.00
    Landscaping Contract    10,500.00
    Snow Removal    0.00
    Payroll - Office    120,000.00
    Management Fees    150,000.00
    Legal & Professional Fees    125,000.00
    Telephone/Pager    4,000.00
    Computer Hardware/Sftwre    12,000.00
    Office Supplies    400.00
    Real Estate Taxes    5,250,000.00
    Insurance    52,500.00
    Mortgage Interest    2,250,000.00
    Total:    101,441,750.00        101,441,750.00
Prepaid Expense Schedule
    8/31/20
    Description    Period Start    Period End    Amount Paid    Months    Monthly Amount    Prepaid Balance
    DC Taxes    11/1/20    4/30/20    4,500,000.00    6    750,000.00    - 0
    Prepaid RE Taxes                    750,000.00    - 0
    Description    Period Start    Period End    Amount Paid    Months    Monthly Amount    Prepaid Balance
    Insurance    8/1/19    7/31/20    90,000.00    12    7,500.00    - 0
    Prepaid Insurance                    7,500.00    - 0
    Description    Period Start    Period End    Amount Paid    Months    Monthly Amount    Prepaid Balance
    Elevator Contract    8/1/20    8/31/20    5,500.00    1    5,500.00    5,500.00
    Prepaid Expenses                    5,500.00    5,500.00
Accrued Expense Schedule
    8/31/20
    Month    Vendor    Description    GL Name    Amount
    5/31/20    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750,000.00
    6/30/20    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750,000.00
    7/31/20    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750,000.00
            Total    Accrued RE Taxes    2,250,000.00
    Month    Vendor    Description    GL Name    Amount
            Total    Accrued Insurance Payable    - 0
    Month    Vendor    Description    GL Name    Amount
    8/31/20    Chase Bank    8/20 Interest    Mortgage Interest    250,000.00
            Total    Accrued Interest    250,000.00
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Please answer at least 7 or 8 of the following questions:
1.
Which monthly and annual variances on the income statement require input from the onsite property management team? What are examples of questions you would ask for those line items?
2.
Based upon the information provided can you identify any additional accruals that are needed? If yes, what entry needs to be recorded?
3.
Based upon the information provided can you identify any additional amortization entries that are needed? If yes, what entry needs to be recorded?
4.
Based upon the information provided, would you have any questions on any of the balance sheet accounts?
5.
Do you have any overall questions or concerns when looking at the balances in the trial balance?
6.
Based upon the information provided, what is the interest rate on the mortgage payable?
7.
What journal entry(s) will you record if the real estate tax bill is paid in period 09/20 (assuming that the payment covers a period of 6 months)?
Answered 1 days After Apr 03, 2024

Solution

Sandeep answered on Apr 04 2024
5 Votes
Questions
    Please answer at least 7 or 8 of the following questions:
    1.    Which monthly and annual variances on the income statement require input from the onsite property management team? What are examples of questions you would ask for those line items?
    2.    Based upon the information provided can you identify any additional accruals that are needed? If yes, what entry needs to be recorded?
    3.    Based upon the information provided can you identify any additional amortization entries that are needed? If yes, what entry needs to be recorded?
    4.    Based upon the information provided, would you have any questions on any of the balance sheet accounts?
    5.    Do you have any overall questions or concerns when looking at the balances in the trial balance?
    6.    Based upon the information provided, what is the interest rate on the mortgage payable?
    7.    What journal entry(s) will you record if the real estate tax bill is paid in period 09/20 (assuming that the payment covers a period of 6 months)?
    8.    What journal entry(s) will you record if the real estate tax bill is paid in period 10/20 (assuming that the payment covers a period of 6 months)?
    9.    Do you expect there will be sufficient cash on hand to pay for the real estate tax bill in period 09/20 or 10/20? Explain why or why not.
    10.    What journal entry(s) will you record if the insurance bill is paid in period 09/20 (assuming that the payment covers a period of 12 months)?
    11.    Prepare a balance sheet using the information provided.
    12.    If you were auditing the books, what accounts would you highlight for further testing? For which accounts would you request more detailed back-up and why?
    13.    What are this company's largest sources of income and expenses?
    14.    How is this company doing financially? Is the net worth increasing or decreasing? How can you tell?
    15.    Are there any additional questions, concerns or comments you may have after looking through the financial statements and schedules?
    Monthly Variances on the income statement requiring input from the onsite property management team
        Unfavourable Variances
            Actual    Budget    Variance    % Variance    Category variances over 10% and $2,500 on a monthly basis.
        RETAIL RENTS
        Rent Abatements    (10,000.00)    0.00    (10,000.00)    100.00%
        EXPENSES
        CLEANING
        Contract Cleaning Service    85,000.00    50,000.00    35,000.00    70.00%
        Day Porte
Matron    30,000.00    20,000.00    10,000.00    50.00%
        REPAIRS & MAINTENANCE
        Elevator R & M    25,000.00    500.00    24,500.00    4900.00%
        Electrical    500.00    100.00    400.00    400.00%
        Interior Plant Mntnce    10,000.00    5,000.00    5,000.00    100.00%
        UTILITIES
        Electricity    150,000.00    100,000.00    50,000.00    50.00%
        ADMINISTRATIVE
        Legal & Professional Fees    125,000.00    0.00    125,000.00    100.00%
        Annual Variances on the income statement requiring input from the onsite property management team
        Unfavourable Variances
            Actual    Budget    Variance    % Variance    Category variances over 10% and $10,000 on an annual basis.
        RETAIL RENTS
        Rent Abatements    (10,000.00)    0.00    (10,000.00)    100.00%
        EXPENSES
        CLEANING
        Contract Cleaning Service    680,000.00    280,000.00    400,000.00    142.86%
        Day Porte
Matron    240,000.00    160,000.00    80,000.00    50.00%
        REPAIRS & MAINTENANCE
        Pest Control Contract    1350    1200    150    12.50%
        Interior Plant Mntnce    45,000    40,000    5,000    12.50%
        Interior Painting    22000    20000    2000    10.00%
        UTILITIES
        Electricity    1200000    800000    400000    50.00%
        ADMINISTRATIVE
        Legal & Professional Fees    125000    5000    120000    2400%
        NON-OPERATING EXPENSES
        Mortgage Interest    2250000    2000000    250000    12.50%
        Question from onsite property management team :
    1    Please can you explain the reason for the variance in Rent abatement ? What is theis account created for ?
    2    Kindly provide the reason for high unfavourable variance in the above mentioned expenses -
         - Contract Cleaning Service
         - Day Porte
Matron
         - Electricity
         - Legal & Professional Fees
    3    Please can you explain the reason for high favourable variances in some of the expenses? Was it that these are deliberately unde
udgeted to provide better position of firm to management?
            % Variance
         - Elevator Service Contract    -100%
         - HVAC R & M    -100%
         - Plumbing R & M    -100%
         - Fire & Safety R & M    -100%
    Identify any additional accruals that are needed
        FIXED EXPENSES    Cu
ent Period                Year-To-Date
            Aug 2020    Aug 2020    Variance    % Variance    Aug 2020    Aug 2020    Variance    % Variance
        Real Estate Taxes    0    1000000    -1000000    -100%    5250000    8000000    -2750000    -34.38%
                            (A)    (D)
        Additional Accrual
        Month    Vendor    Description    GL Name    Amount
        43982    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750000
        44012    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750000
        44043    DC Treasurer    2nd Half RE Taxes    Real Estate Taxes    750000
                    Total    2250000    (B)
        Total R E Taxes Accrued ©    $7,500,000.00    (A + B)
        Short Accrual     $500,000.00
        Journal Entry:
    a    Account         Dr.    Cr.
        Real Estate Taxes        $500,000.00
         Accrued RE Taxes            $500,000.00
    b    FIXED EXPENSES    Cu
ent Period                Year-To-Date
            Aug 2020    Aug 2020    Variance    % Variance    Aug 2020    Aug 2020    Variance    % Variance
        Insurance    0    7500    -7500    -100%    52,500.00    60,000.00    (7,500.00)    -12.50%
                            A    B
        Total Insurances Accrued    $52,500.00    C
        Short Accrual     $7,500.00    (B - C)
        Journal Entry:
        Account         Dr.    Cr.
        Insurance        $7,500.00
         Accrued Insurance payable            $7,500.00
    Identify any additional amortization entries that are needed
        REPAIRS & MAINTENANCE    Cu
ent Period                Year-To-Date
            Aug 2020    Aug 2020    Variance    % Variance    Aug 2020    Aug 2020    Variance    % Variance
        Elevator Contract    0    5500    -5500    -100%    38500    44000    -5500    -12.50%
                            (A)    (D)
        Amortization Amount
        Description    Period Start    Period End    Amount Paid    Months    Monthly Amount    Prepaid Balance
        Elevator Contract    8/1/20    8/31/20    5500    1    5500    5500
        Prepaid Expenses                    5500    5500
        Journal Entry:Amortization
        Account         Dr.    Cr.
        Elevator Contract        $5,500.00
         Prepaid Expenses            $5,500.00
        FIXED EXPENSES    Cu
ent Period                Year-To-Date
            Aug 2020    Aug 2020    Variance    % Variance    Aug 2020    Aug 2020    Variance    % Variance
        Plumbing R & M    0    750    -750    -100%    0    750    -750    -100.00%
                            (A)    (D)
        Amortization Amount
        Description    Period Start    Period End    Amount Paid    Months    Monthly Amount    Prepaid Balance
        Prepaid Rent    8/1/20    8/31/20    500    1    500    500
        Prepaid Expenses                    500    500
        Journal Entry:Amortization
        Account         Dr.    Cr.
        Plumbing R & M        $500.00
         Prepaid Rent            $500.00
         Any questions on any of the balance sheet accounts
            Debit    Credit
    a    A/R - Other        50,000
        Why is the balance in A/R -Other in credit. The nature of this account is debit as it deals with debtors .
        All the Assests are debited . The B/s account will need to be investigated .
            Debit    Credit
    b    Defe
ed Leasing Comm    150000
        This B/s account need to be Investigated further to know the true nature of this account. What...
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