NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF CONSOLIDATION
Included in the Consolidated Balance Sheet is the wholly-owned subsidiary State—Monroe Equipment Corporation, a
non-operating unit which holds title to the furnishings and equipment of the Palmer House, Chicago. The corporation
has adopted the policy of non-consolidation of companies which are not wholly owned subsidiaries. Holdings in such
companies are carried on the accompanying balance sheet as investments at cost, which cost was $1,033,445.18 greater
than' the book value of such investments as shown by the balance sheets of these companies. Such controlled but non*
consolidated companies are the Palm Beach Biltmore Company (50%), Mayflower Hotel Corporation (68.75%) and
Neil House Company (50%).
Holdings in the Bermuda Development Company, Ltd., represent approximately 7% of the capital common stock. At quoted
official exchange rates, the par value in dollars at December 31,1947 amounted to $294,410.25 against a cost of $265,832.00.
Inventories of saleable merchandise and operating supplies were ascertained by physical count and were priced at cost,
which basis has been consistently followed by the various operating units of the company. Stocks of saleable merchandise
representing primarily food and beverages, comprising the major part of the inventories represent normal turnover needs
of current business.
(3) FIXED ASSETS, DEPRECIATION AND AMORTIZATION
' Fixed asset values and depreciation reserves have been carried over from the predecessor companies. The fixed asset values
, represent cost to predecessor companies, plus additions.
Depreciation on buildings has been determined according to the straight line method on the basis of an estimated over-all
life from date of original construction, ranging from 50 years in the case of the Plaza Hotel of New York, to 40 to 45 years
in the case of the Palmer House, the Stevens Hotel and the Town House, to a 30 year life for the Lubbock Hilton Hotel.
Leaseholds and improvements are being amortized over the remaining life of the existing leases.
Furniture, furnishings and equipment are depreciated on a straight line basis at varying rates by classifications in accordance
with the estimated useful life of the respective assets.
Expenditures for rehabilitation, alterations and revisions are charged to a special classification and amortized over varying
periods of from three to ten years. —
Current depreciation rates being applied to cost basis by individual properties appear to be reasonable and adequate and
in accordance with industry-wide practice.
Operating equipment represents reserve stock inventories of linens, china, glassware and silverware at cost, and, stocks
in use shown at net values after deduction of reserves covering estimated depreciation and depletion of such stocks through
loss and discard. " • -
(4) DUE FROM EMPLOYEES AND OFFICERS FOR STOCK PURCHASES
In accordance with the agreement of consolidation 50,000 Shares of Common Stock were reserved for offering to key
employees at a price of $17.50 per share, payments therefor to be made in installments over a period not exceeding four(4)
years. (Since extended for the period of one (1) year by action of Board of Directors). As of December 31, 1946 a total
of 44,342 shares were subscribed for by various employees. Of this total, subscriptions to 5,424 shares were cancelled
during the current year, leaving a total of 38,918 shares subscribed for as of December 31, 1947 at a total cost of
$681,065.00. Of this amount $265,300.00 has been paid on account, leaving an unpaid balance of $415,765.00 as of the
balance sheet date. This unpaid balance is secured by signed purchase agreements of the individual employees. The
shares so subscribed have been issued as partially paid shares entitled to dividends only to the extent to which the purchase
price therefor has been paid.