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

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AC1220 ACCOUNTING IProject Part 2Page1AC1220 Financial Statement Analysis and Loan Recommendation for CityRides and Extreme ScooterTask 1a.Using the adjusted trial balance provided, prepare the income statement, statement ofowner’s equity, and balance sheet for City Rides for thetwo 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 theirfinancial positions.Answer the following:1.Which business has the larger net sales in dollar terms, and what is the trend in net salesover the two years for both companies?2.Compare the ending capital balances of the two businesses, compute the dollar increaseor decrease, and suggest a reason for the large change in ending capital for ExtremeScooter.3.Compare the inventory balances of both businesses. Which tends to have more inventoryon hand, and what are one advantage and one disadvantage of keeping large amounts ofinventory?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 2a.Compute the accounting ratios for City Rides and Extreme Scooter for the year endingDecember 31, 20x3.Provide an analysis of each ratio, explaining whether it is favorable orunfavorable and indicating the trend over time.(Word count: 600 words)Task 3Imagine you are an accountant reporting to the senior commercial loan officer of a regionalbank.The bank is deciding between approving a $25,000 loan application from City Rides orExtreme Scooter. Compare the financial health of both businesses based on their financialstatements, ratios, and other insights from your analysis. Provide a recommendation on whichbusiness should receive the loan and justify your decision.(Word count: 800 words)

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AC1220 ACCOUNTING IProject Part 2Page2ProjectPart2:UsingAccounting InformationforDecision MakingCity Rides,a proprietorship engaged in the sale of mopeds to the public, completesitssecond year ofoperationson December31,20x3.Task 1:a.Adjusted trial balance amounts from the books of City Rides are listed below, for the two yearsended December31, 20x3:AccountAt Dec. 20x3At Dec 20x2DEBITCREDITDEBITCREDITCash$21,030$19,020Accounts Receivable18,50012,000Prepaid Rent1,8001,600Allowance for UncollectibleAccounts$100-Supplies500120Inventory21,25015,720Office Equipment2,7001,800Truck15,000-Accumulated Depreciation—Office Equipment900360Accumulated Depreciation—Truck1,500-Accounts Payable4,1505,850Current portion ofLong-TermNote Payable5,000-Long-Term NotePayable20,000-Capital—Harris45,00045,000Withdraws—Harris2,5002,500Sales Revenue25,80016,500Sales Return and Allowances800Cost of Goods Sold15,45011,040Wages Expense3,6001,800Rent Expense800800Depreciation Expense—OfficeEquipment540360Depreciation Expense—Truck1,500-Utilities Expense550650Supplies Expense250300Uncollectible Accounts Expense80-$106,850$106,850$67,710$67,710

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AC1220 ACCOUNTING IProject Part 2Page3Use the aboveadjusted trialbalance amountsto complete the financial statements below by filling in theshaded cells:City RidesStatement of Owner’s EquityFor the Year Ended December, 20x320x320x2Beginning Capital$44,050$45,000Add: Net Income4,0301,55046,550Less: Drawing(2,500)Ending Capital, Harris$48,080$44,050City RidesIncome StatementFor the Two Years Ended December, 20x320x320x2Sales Revenue$25,800$16,500Less: Sales Return and Allowances($800)NetSales Revenue25,00016,500Less: Cost of Goods sold(15,450)(11,040)Gross profit9,5505,460Less: 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(80)-Net Income$4,030$1,550

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