Question P3-7 By: Arash Foroudi Becky Truax Julio Perez Ken Chen By: Arash Foroudi Becky Truax Julio Perez Ken Chen

Question Cedar Fair, L. P. (Limited Partnership) owns and operates four seasonal amusement parks: Cedar Point in Ohio, Valleyfair near Minneapolis/St. Paul, Dorney Park and Wildwater Kingdom near Allentown, Pennsylvania, and Worlds of Fun/Oceans of Fun in Kansas City. The following are summarized transactions similar to those that occurred in a recent year (assume 2008):

Requirements 1.) For each of these transactions, record journal entries. Use the letter of each transaction as its reference. Note that transaction (d) will require 2 entries, one for revenue recognition and one for the related expense. 2.) Use the following chart to identify whether each transaction results in a cash flow effect from operating (O), investing (I), or financing (F) activities, and indicate the direction and amount of the effect on cash (+ for increase and - for decrease). If there is no cash flow effect, write none. The first transaction is provided as an example. 1.) For each of these transactions, record journal entries. Use the letter of each transaction as its reference. Note that transaction (d) will require 2 entries, one for revenue recognition and one for the related expense. 2.) Use the following chart to identify whether each transaction results in a cash flow effect from operating (O), investing (I), or financing (F) activities, and indicate the direction and amount of the effect on cash (+ for increase and - for decrease). If there is no cash flow effect, write none. The first transaction is provided as an example.

(a) Guests at the parks paid $89,664,000 cash in admissions. (R2) Operating +89,664,000 Cash (A)+89,664,000 Admissions Revenue (+R,+SE)89,664,000

(b) The primary operating expenses (such as employee wages, utilities, and repairs and maintenance) for the year were $66,347,000 with $60,200,000 paid in cash and the rest on account. (R2) Operating -60,200,000 Primary Operations Expense (-E,-SE)66,347,000 Cash (-A)60,200,000 Account payable (+L)6,147,000

(c) Interest paid on long term debt was $6,601,000 (R2) Operating -6,601,000 Interest Expense (+E,-SE)6,601,000 Cash (-A)6,601,000

(d) The parks sell food and merchandise and operate games. The cash received during the year for these combined activities was $77,934,000. The cost of the merchandise sold during the year was $19,525,000. (R2) Operating +77,934,000 Cash (A)+77,934,000 Food, Merchandise, and Games Revenue (+R,+SE) 77,934,000 Cost of Goods Sold (+E,-SE)19,525,000 Food, Merchandise Inventory (A-) 19,525,000

(e) Cedar Fair purchased and built additional buildings, rides, and equipment during the year, paying $23,813,000 in cash. (R2) Investing -23,813,000 Equipment and Building (A+)23,813,000 Cash (-A)23,813,000

(f) The most significant assets for the company are land, buildings, rides, and equipment. Therefore, a large expense for Cedar Fair is depreciation expense (related to using these assets to generate revenues during the year). For the year, the amount was $14,473,000 (credit Accumulated Depreciation) (R2) None Depreciation Expense (+E,-SE)14,473,000 Accumulated Depreciation (-A)14,473,000

(g) Guests may stay in the parks at accommodations owned by the company. During the year, Accommodations Revenue was $11,345,000; $11,010,000 was paid by the guests in cash and the rest was owed on account. (R2) Operating +11,010,000 Cash (A)+11,010,000 Account Receivable (A+)335,000 Accommodations Revenue (+R,+SE)11,345,000

(h) Cedar Fair paid $2,900,000 principal on notes payable. (R2) Financing -2,900,000 Note Payable (-L)2,900,000 Cash (-A)2,900,000

(i) The company purchased $19,100,000 in food and merchandise inventory for the year, paying $18,000,000 in cash and owing the rest on account. (R2) Operating -18,000,000 Inventory (A+)19,100,000 Cash (A-)18,000,000 Account Payable (+L)1,100,000

(j) The selling, general, and administrative expenses such as the president’s salary and advertising for the parks, classified as operating expenses, for the year were $21,118,000; $19,500,000 was paid in cash, and the rest was owed on account. (R2) Operating -19,500,000 Selling, general, and administrative Expense (+E,-SE) 21,118,000 Cash (A-)19,500,000 Account Payable (+L)1,618,000

(k) Cedar Fair paid $8,600,000 on accounts payable during the year. (R2) Operating -8,600,000 Account Payable (L-)8,600,000 Cash (A-)8,600,000