Preparing financial statements and closing the accounts -

Question

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.

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

Task 2: Using the Accounting Worksheet

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