Professional Documents
Culture Documents
Mr. and Mrs. Ilyong Kim had purchased the Pinetree sisted of 20 units (i.e., rentable rooms) and was·located
Motel in 1998 with their life savings, supplemented by ·near a vacation area that was popular during both the
a loan from a close personal friend. The motel con- , summer and winter seasons. The Kims had entered the
motel business because Mrs. Kim had-long wanted to
* Copyright © by James S. Reece. run a business of her own.
· B_oth Mr. and Mrs. l(jm felt that they had been suc- EXHIBIT 1 Cash Register and Checkbook .
cessful. Each year saw a growth in.revenue from room Summary During 2005
rentals. Furthermore, their bank balance had in- ,,
crease<;l, They n~ted th~t_many of tp~ir custouiers re- \',~,,::;:, '·. Receipts .
turned year after yf!ar. Tshis·,was attributed to their lo-
cation aqg. ·the_u: effort;·to provide consistently clean
rooms _and,~p'-fo-date furnishings.
The Kims had no formal business training but felt 1 . ,•" ' I:-::;,.' '
their expe.rieuc;e _si,nce acquiring th~ motel had alerted ,;: , ,' t
them to the management problems involved. ·Both Mr. ; ·.,,:,,p{:/<r . ,'.;;7,.,1:~lj . ''..·.·o·
and Mrs. Kim devoted their full time to operating the
motel. In addition, they hired part-time help for da_ily
-r9orii,:,cleaning work. They had no •dining facilities·but
had installed vending .machines· to supp1emeni'room
rentals; The vending machines •posed -no inventory ,or
,~maintenance problems as the •~ending mach_ine; com-
. pany p~ovided servicing and:1J1a:i11!~~~'§e. -'",~-ir·:-1
- - A frequent gue·st at __I}i"~e,W~~:t:~ te( was -Marc_us
Carter, controller _oJ ifJarge~6nm.pJ1.ny.'.~ •£ arter vis-
ited_a c9m11~ -£JJt~h fi>liJtt '°ri~i r _th~ motel several
' -tijnej Fl ~ e1iJJ Kf h.~ tiyef at -tlie motel during these
t.~tfipi~ 4e~~e~1@~acquainted with the Kimsi , _- · ·
"-:~~ ~M'ay~2.0(f~Mrs. Kim 'showed Mr. Cartef the cur-
a
rent ~lte .o f m.Qtel trade jou,rnal that contaim;d oper-
= £~t~gf~tf for ~~tels . wi_ th 40 o~-f~wer qnits Jo~ the
_~~lendai: year 2005. Mrs. Kim co,nunented: '. 'These
figu,re~·show,a profit_of2J _per~ent. Our profit-lastyear
was $134,003 on-sales of,$244,461, or 55p~rcent. We bank balance has steadily risen. Furthermore, lhav~ a
think 2005 ~as. _ b~~t year to ~ate, .gut we can't locai' accountant fuak~-out the annual income tax state-
in
make our figures j rbe with th~se the magazine, al).d inents so I don't' have to worry about them~ That 'in-
\Ve wonder 'if we really' are 34 percent ahead of the in- come tax stuff is so complicated'that I avoid.if."
dustry·average. Can you--help us?" . . ... :?- - . ,..- Mr. Carter worked with·the ·trade journal's figures
" Mr. Carter was interested imd' willing tp ·help. He (Exhibit 2) and the cash summary, (Exhibit -'!) that
told Mrs. Kim to get the availabfo 'figures for 2005 so evening a,nd quickly fo~:;h~2 n~eded.IIlQt;e .infonna-
that'he ,c6uld 1o0k them over that everiing: The prind- -tion. He tol<;l Mrs. Kim that p.e was returning to t~e
pal records the Kimir kept to reflect the motel's finan- home office· the neit morning b~t would he
back in
cial transactions were a record of receipts taken from two weeks for
another visit to the.bni~ch plant. ·'Mean-
the cash register and a checkbook describing cash paid while, he wanted Mrs. Kim to g·et together some' addi-
out. In addition, certain rough notations of other ex- tional information. Mr. Carter suggested to Mrs. Kim
penses incurred were available. that an -important noncash expense was depreciation.
_Jhat evening Mrs. KJm_showe~dMt CarteJ: the_cash...... Mr. _Carter alsQ wanted to lqipw a.bout expenses th~t
summary for the year 2005, as given in Exhibit 1. Mr. had been incurred in 2004 but not paid until 2005. He
Carter immediately noted that the difference between told Mrs. :l(jm to check up on wages and salaries,' in-
receipts and expenpitures was $47,903 and asked Mrs. surance, advertising, taxes; 'utilities," and any pther
Kim to explain why she had stated the profit was items paid in 2005 but applicable to 2004.
$134,003. Mrs. Kim replied, "Oh, that's easy. Qur In addition, ME Carter instructed.Mrs. Kim to try
drawings aren'te~penses; after.all, we are the, owners. to find items _of expense prop~;rly _chargeable to 2005
My husband and I _have consistently taken only, about _but not paid by December. 31, 2005 . Mrs. Kim told
$85,000 a year out because we want the rest of the Mr. Carter the same types of expenses were involved,
profits to accumulate in the business. As I said, our · that is, wages and salaries, insurance, advertising, taxe_s,
EXHIBIT 2 2005 Operating Data for Motels with EXHIBIT 3 Additional Information about
40 or Fewer Units (expressed as the Business
-:~ill
percentages of total revenues)
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