AC1220 Accounting I Project Part 1: The Accounting Cycle

Name: AC1220 Accounting I Project Part 1: The Accounting Cycle
Brand: ITT of Indianapolis
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Author: Nora Walker

This assignment solution covers key concepts in the accounting cycle for Accounting I.

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AC1220 ACCOUNTING I Project Part 1
Page 1
AC1220 Accounting I
Project Part 1: The Accounting Cycle
"Karen Harris has started a new scooter retail business, City Rides, and has made several
financial transactions throughout the month of December 20x2. After journalizing the
transactions, adjusting the trial balance, and preparing the financial statements, how would you
evaluate the accuracy of the income statement, the statement of owner’s equity, and the balance
sheet of the business for the month? Additionally, explain the process of closing the temporary
accounts and the impact of those closures on the owner’s equity. Please also ensure that your
analysis includes a detailed discussion on how each step in the accounting cycle contributes to
accurate financial reporting for a small business."
Word Count Requirement: 800-1000 words

AC1220 ACCOUNTING I Project Part 1
Page 2
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.

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University

ITT of Indianapolis

Subject

Accounting

AC1220 Accounting I Project Part 1: The Accounting Cycle

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