AC1220 ACCOUNTING I Project Part 1 Page 1 Project Part 1: The Accounting Cycle Using the provided transactions and adjustments for December 20x2, journalize all transactions, complete the accounting worksheet, and prepare the income statement, statement of owner’s equity, and balance sheet for City Rides as of December 31, 20x2. Additionally, make the necessary closing entries to close the temporary accounts to the Capital account. Ensure all calculations are accurate and provide clear explanations for each step. Your response should be between 800 and 1,200 words. AC1220 ACCOUNTING I Project Part 1 Page 2 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. AC1220 ACCOUNTING I Project Part 1 Page 3 The Chart of Accounts The ledger of City R ides is composed of the following accounts. Classify each account by account type. Choose from among the following items: Asset Contra - asset Liability Owner’s e quity Account Name Account Type Cash Asset Accounts Receivable Asset Supplies Asset Prepaid Rent Asset Inventory Asset Office Equipment Asset Accumulated Depreciation — Office Equipment Contra Asset Accounts Payable Liability Capital — Harris Owner’s Equity Withdrawals — Harris Owner’s Equity Income Summary Owner’s Equity Sales Revenue Contra Asset Cost of Goods Sold Contra Asset Wages Expense Contra Asset Rent Expense Contra Asset Depreciation Expense — Office Equipment Contra Asset Supplies Expense Contra Asset Complete the following s chedule to track the purchase and sale of inventory items during December 20x2. Us e 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) 13 Purchase 10 $520 $5200 16 Sale (6) $506.66 ( 3040 ) 16 Discount (200) (240) 8 3960 15 11760 Closing Inventory =3960+11760=15720 Cost of goods sold = 8000+3040 =$11040