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AC1220 Financial Statement Analysis and Loan Recommendation for City Rides and Extreme Scooter

This assignment analyzes financial statements for City Rides and Extreme Scooter and provides loan recommendations.

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    AC1220 ACCOUNTING I Project Part 2 Page 1 AC1220 Financial Statement Analysis and Loan Recommendation for City Rides and Extreme Scooter Task 1 a. Using the adjusted trial balance provided, prepare the income statement, statement of owner’s equity, and balance sheet for City Rides for the two years ended December 31, 20x3. Complete the financial statements by filling in the shaded cells with the required amounts. (Word count: 500 words) b. Using the financial statements of Extreme Scooter and City Rides, compare their financial positions. Answer the following: 1. Which business has the larger net sales in dollar terms, and what is the trend in net sales over the two years for both companies? 2. Compare the ending capital balances of the two businesses, compute the dollar increase or decrease, and suggest a reason for the large change in ending capital for Extreme Scooter. 3. Compare the inventory balances of both businesses. Which tends to have more inventory on hand, and what are one advantage and one disadvantage of keeping large amounts of inventory? 4. Compare the accounts receivable balances. Which business tends to sell more on account, and what is one disadvantage associated with sales on account? (Word count: 750 words) Task 2 a. Compute the accounting ratios for City Rides and Extreme Scooter for the year ending December 31, 20x3. Provide an analysis of each ratio, explaining whether it is favorable or unfavorable and indicating the trend over time. (Word count: 600 words) Task 3 Imagine you are an accountant reporting to the senior commercial loan officer of a regional bank. The bank is deciding between approving a $25,000 loan application from City Rides or Extreme Scooter. Compare the financial health of both businesses based on their financial statements, ratios, and other insights from your analysis. Provide a recommendation on which business should receive the loan and justify your decision. (Word count: 800 words)

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    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

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    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 $4 4 ,0 5 0 $45,000 Add: Net Income 4,0 3 0 1,550 46,550 Less: Drawing (2,500) Ending Capital, Harris $ 48,0 8 0 $44,050 City Rides Income Statement For the Two Years Ended December, 20x 3 20x3 20x2 Sales Revenue $25,800 $16,500 Less: Sales Return and Allowances ($800) Net Sales Revenue 25,000 16,500 Less: Cost of Goods sold ( 15,450 ) ( 11,040 ) Gross profit 9,550 5,460 Less: operating expenses: Wages Expense ( 1,800 ) ( 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 ( 8 0 ) - Net Income $ 4,0 3 0 $1,550

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