Question: Given the facts in Problems II and I and the following additional information, prepare the pro forma income statements for each of the first five years:

Rooms operating costs average 60% of total room sales revenue. Indirect expenses will be $40,000 in Year 1, and will increase by $4,000 a year for each of the next 4 years. The pre-opening interest and other expenses total $100,000 and will be amortized equally over each of the first 5 years. Income tax, if any, will be 25% of earnings before income tax. Note, however, that if there are any losses, they may be carried forward and deducted from earnings before income tax, before the 25% tax rate is applied. (Round all calculated figures to the nearest $1,000.)

Problems II: Given the facts in P13.4, assume the building will be depreciated at 6% double declining balance, and that furniture and equipment will be depreciated at 25% double declining balance. Prepare depreciation schedules for the first 5 years. (Round calculated figures to the nearest $1,000.)

Problems I: A new 50-room budget motel is being planned. Total cost will be $1,450,000, of which land will be $150,000, building $900,000, furniture and equipment $300,000, and the balance for pre-opening interest and other expenses. The building will be financed 70% by an 8% mortgage for 21 years. The annual payment to amortize (pay back principal and interest) this mortgage will be $63,000. The furniture and equipment will be financed 75% by a mortgage at 11%, repayable in five equal installments of $61,000 principal and interest. Apart from the mortgage and chattel mortgage amounts, the balance of the total investment required will be from equity.

a. Calculate the amount of the equity investment.

b. Prepare the building mortgage repayment schedule for the first five years. Round calculated figures to the nearest $1,000.

c. Prepare the chattel mortgage repayment schedule. Round calculated figures to the nearest $1,000