ac1220_project part I.

Project Part 1: The Accounting Cycle

Karen Harris starts her own scooter retail business, City Rides, on December 1, 20x2. The business operates as a proprietorship from a rented space near a busy downtown area. Harris hires Jim Waters as the sales associate and assistant manager of the business. The following transactions take place during December 20x2.

Transactions
Dec. 1	Harris deposits $45,000 into the business bank account. In exchange, she receives capital in the proprietorship.
1	Harris writes and mails check #001 for $2,400 for rent. The rent payment covers rent for the three months ended February 28, 20x2.
2	Harris purchases office equipment for $1,800 by check #002.
2	Harris purchases office supplies for $420 by check #003.
2	Harris purchases 20 Model X mopeds at $500 each and 15 Model L mopeds at $800 each, costing a total of $22,000, on account from a supplier, Fun Brands: · Harris elects to use the first-in-first-out (FIFO) method to account for inventory. · Fun Brands provides an invoice with the following terms: 2/10 net 30.
9	In the first week of operation, City Rides sells 16 Model X mopeds at $750 each: 10 are sold on account, and the rest are sold for cash.
12	City Rides makes payment to Fun Brands in full settlement of accounts payable by check #004. Payment is net of the purchase discount. Hint: The terms are 2/10 net 30, and any purchase discount received reduces the cost of inventory.
13	City Rides purchases 10 Model X mopeds from Fun Brands on account at a cost of $520 each.
16	The sales for the week are as follows: 6 Model X mopeds sold on account for $750 each—inventory cost accounted using the FIFO method.
18	Cash receipts from customers on accounts receivable are $7,100.
30	Sales for the rest of December are as follows: 2 Model L mopeds sold for cash for $1,100 each.
30	Harris receives the utilities bill for December 20X2 for $650, still payable at month end.
30	Harris pays wages amounting to $1,800 by check #005.
30	Harris withdraws $2,500 in cash.

The Chart of Accounts

The ledger of City Rides is composed of the following accounts. Classify each account by account type. Choose from among the following items:

Asset Contra-asset Liability Owner’s equity

Account Name	Account Type
Cash
Accounts Receivable
Supplies
Prepaid Rent
Inventory
Office Equipment
Accumulated Depreciation—Office Equipment
Accounts Payable
Capital—Harris
Withdrawals—Harris
Income Summary
Sales Revenue
Cost of Goods Sold
Wages Expense
Rent Expense
Depreciation Expense—Office Equipment
Supplies Expense

Complete the following schedule to track the purchase and sale of inventory items during December 20x2. Use the FIFO method to account for the cost of goods sold. The first inventory purchase and sale are included as an example.

MODEL X					MODEL L
Date	Purchase (sale)	Quantity	Cost per unit	Total		Date	Purchase (sale)	Quantity	Cost per unit	Total
Dec. 2	Purchase	20	$500	$10,000		Dec. 2	purchase	15	$800	$12,000
9	(Sale)	(16)	$500	($8,000)		30
13
16
16

Task 1: Making Journal Entries

Journalize the transactions for December 20x2. The first three transactions are journalized already. Use the following template to make journal entries and check off transactions as they are entered, using the check boxes. Double-click each check box and select “checked” in the dialog box. Click the OK button to check.

Date	Account and Explanation	Debit	Credit
Dec 1	Cash	$45,000
	Capital		$45,000
	*To record owner contribution*

1	Prepaid Rent	$2,400
	Cash		$2,400
	*To record prepaid expense*

Date	Account and Explanation	Debit	Credit

Task 2: Using the Accounting Worksheet

Adjustments
Dec. 31	Depreciation on office equipment, $360
31	Supplies used, $300
31	Recognized rent expense—prepaid rent account

Complete the worksheet provided on the next page by making the adjustments described. Compute adjusted trial balance amounts and enter account balances into the income statement and balance sheet columns, where necessary.

City Rides
Accounting Worksheet
For the Month Ended Dec. 31 20x2
Account	Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$19,020
Accounts Receivable	12,000
Prepaid Rent	2,400
Supplies	420
Inventory	15,720
Office Equipment	1,800
Accumulated Depreciation—Office Equipment	-
Accounts Payable		$5,850
Capital—Harris		45,000
Withdrawals—Harris	2,500
Sales Revenue		16,500
Cost of Goods Sold	11,040
Wages Expense	1,800
Rent Expense	-
Depreciation Expense—Office Equipment	-
Utilities Expense	650
Supplies Expense	-
*Total*	$67,350	$67,350
*Net Income*
						*TOTAL*

Task 3: Preparing Financial Statements and Closing the Accounts

Using the following adjusted trial balance amounts, prepare the income statement, the statement of owner’s equity, and the balance sheet of City Rides for the month ended December 31, 20x2.

City Rides
Trial Balance
December 31, 20x2
Account	Debit	Credit
Cash	$19,020
Accounts Receivable	12,000
Prepaid Rent	1,600
Supplies	120
Inventory	15,720
Office Equipment	1,800
Accumulated Depreciation—Office Equipment		360
Accounts Payable		5,850
Capital—Harris		45,000
Withdrawals—Harris	2,500
Sales Revenue		16,500
Cost of Goods Sold	11,040
Wages Expense	1,800
Rent Expense	800
Depreciation Expense—Office Equipment	360
Utilities Expense	650
Supplies Expense	300
	$67,710	$67,710

City Rides
Income Statement
For the Year Ended December 20x2
Sales Revenue
Less Expenses:






Net Income

Preparing Financial Statements

City Rides
Statement of Owner’s Equity
For the Year Ended December 20x2
Beginning Capital



Ending Capital, Harris

City Rides
Balance Sheet
December 31, 20x2
Assets			Liabilities



			Owner’s Equity



Total Assets			Total Liabilities and Owner’s Equity

Closing Temporary Accounts Using the journal template given, make the following closing entries. Use the revenue, expense, and withdrawals balances given before. Closing Entries
31	Closed Sales Revenues to Income Summary Account
31	Closed Expense Accounts to Income Summary Account
31	Closed Income Summary Account to Capital—Harris, Account
31	Closed Withdrawals—Harris Account to Capital Account

Date		Account and Explanation	Debit	Credit
Dec 31

		*To close sales revenue to income summary*

31






		*To close expenses to income summary*

31

		*To close income summary*

30

		*To close withdrawals account*

---End of Project Part 1---

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AC1220 ACCOUNTING I Project Part 1