AC1220 ACCOUNTING I Project Part 2 Page 1 AC1200 ACCOUNTING I For this assignment, you are tasked with analyzing the financial performance of two businesses, City Rides and Extreme Scooter, based on their financial statements for the years ending December 31, 20x3 and 20x2. • Task 1: Complete the financial statements (Income Statement, Statement of Owner’s Equity, and Balance Sheet) for City Rides using the adjusted trial balance provided. Fill in all the missing amounts and ensure that the financial statements are accurate. • Task 2: a. Compare the trends in net sales for both businesses and determine which business has larger net sales in dollar terms. b. Evaluate the ending capital account balances of both City Rides and Extreme Scooter, compute the dollar change, and suggest reasons for the significant change in Extreme Scooter's ending capital balance. c. Compare the inventory balances of both businesses, identifying which one maintains a larger inventory. Discuss one advantage and one disadvantage of keeping a large inventory on hand. d. Assess the accounts receivable balances of City Rides and Extreme Scooter and determine which company tends to sell more on account. Additionally, mention one disadvantage associated with sales on account. • Task 3: Compute the necessary accounting ratios for both businesses using the formulas provided. For each ratio, explain if it is favorable or unfavorable for each business and whether the trend is improving or deteriorating over time. • Task 4: Based on your analysis, prepare a memorandum to the senior loan officer, Ms. Heather Coldwell, comparing the financial health of both businesses. Make a recommendation on which business should receive the $25,000 bank loan, justifying your choice with key points from the financial statements and ratios. Word Count Requirement: The memorandum should not exceed 2 pages, written in 11 - point Arial font, double - spaced. AC1220 ACCOUNTING I Project Part 2 Page 2 Project Part 2 : Using Accounting Information for Decision Making City Rides, a proprietorship engaged in the sale of mopeds to the public, completes its second year of operations on December 3 1, 20x3 . Task 1: a. Adjusted trial balance amounts from the books of City Rides are listed below, f or the two years ended December 31, 20x3: Account At Dec. 20x3 At Dec 20x2 DEBIT CREDIT DEBIT CREDIT Cash $ 21,030 $19,020 Accounts Receivable 18,500 12,000 Prepaid Rent 1,800 1,600 Allowance for Uncollectible Accounts $ 100 - Supplies 500 120 Inventory 21,250 15,720 Office Equipment 2,700 1,800 Truck 15,000 - Accumulated Depreciation — Office Equipment 900 360 Accumulated Depreciation — Truck 1,500 - Accounts Payable 4,150 5,850 Current portion of Long - Term Note Payable 5,000 - Long - Term Note Payable 20 ,000 - Capital — Harris 45,000 45,000 Withdraws — Harris 2,500 2,500 Sales Revenue 25 ,800 16,500 Sales Return and Allowances 800 Cost of Goods Sold 15,450 11,040 Wages Expense 3,600 1,800 Rent Expense 800 800 Depreciation Expense — Office Equipment 540 360 Depreciation Expense — Truck 1,500 - Utilities Expense 550 650 Supplies Expense 250 300 Uncollectible Accounts Expense 80 - $ 106,850 $ 106,850 $67,710 $67,710 AC1220 ACCOUNTING I Project Part 2 Page 3 Use the above adjusted trial balance amounts to complete the financial statements below by filling in the shaded cells : City Rides Statement of Owner’s Equity For the Year Ended December, 20x 3 20x3 20x2 Beginning Capital Ending Capital, Harris City Rides Income Statement For the Two Years Ended December, 20x 3 20x3 20x2 Sales Revenue Net Sales Revenue Gross profit Less : operating expenses: Net Income