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)?