AC1220 The Accounting Cycle Project Part 1

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AC1220 ACCOUNTING IProjectPart 1Page1Project Part 1: The Accounting CycleUsing 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 closingentries to close the temporary accounts to the Capital account. Ensure all calculations are accurate andprovide clear explanations for each step. Your response should be between 800 and 1,200 words.

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AC1220 ACCOUNTING IProjectPart 1Page2Project Part1: The Accounting CycleKaren Harris starts her ownscooterretail business, City Rides, on December 1, 20x2. The businessoperates as a proprietorship from a rented space near a busy downtown area.Harrishires Jim Waters asthe sales associate and assistant manager of the business. The following transactions take place duringDecember 20x2.TransactionsDec. 1Harris deposits $45,000 into the business bank account. In exchange, she receivescapital in the proprietorship.1Harris writes and mails check #001 for $2,400 for rent. The rent payment covers rentfor the three months ended February 28, 20x2.2Harris purchases office equipment for $1,800 by check #002.2Harris purchases office supplies for $420 by check #003.2Harris purchases 20 Model X mopeds at $500 each and 15 Model L mopeds at$800each, 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 forinventory.•Fun Brands provides an invoice with the following terms: 2/10 net 30.9In the first week of operation, City Rides sells 16 Model X mopeds at $750 each: 10are sold on account, and the rest are sold for cash.12City Rides makes payment to Fun Brands in full settlement of accounts payable bycheck #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.13City Rides purchases 10 Model X mopeds from Fun Brands on account at a cost of$520 each.16The sales for the week are as follows: 6 Model X mopeds sold on account for $750each—inventory cost accounted using the FIFO method.18Cash receipts from customers on accounts receivable are $7,100.30Sales for the rest of December are as follows: 2 Model L mopeds sold for cash for$1,100 each.30Harris receives the utilities bill for December20X2for $650, still payable at monthend.30Harris pays wages amounting to $1,800 by check #005.30Harris withdraws $2,500 in cash.

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AC1220 ACCOUNTING IProjectPart 1Page3The Chart of AccountsThe ledger of CityRides is composed of the following accounts.Classify each accountbyaccount type.Choose from among the following items:AssetContra-assetLiabilityOwner’sequityAccount NameAccount TypeCashAssetAccounts ReceivableAssetSuppliesAssetPrepaid RentAssetInventoryAssetOffice EquipmentAssetAccumulated Depreciation—Office EquipmentContra AssetAccounts PayableLiabilityCapital—HarrisOwner’s EquityWithdrawals—HarrisOwner’s EquityIncome SummaryOwner’s EquitySales RevenueContra AssetCost of Goods SoldContra AssetWages ExpenseContra AssetRent ExpenseContra AssetDepreciation Expense—Office EquipmentContra AssetSupplies ExpenseContra AssetComplete the followingschedule to track the purchase and sale of inventory items during December20x2.UsetheFIFOmethod to account forthecost of goods sold. The first inventory purchase and saleare included as an example.MODEL XMODEL LDatePurchase(sale)QuantityCostper unitTotalDatePurchase(sale)QuantityCost perunitTotalDec. 2Purchase20$500$10,000Dec. 2purchase15$800$12,0009(Sale)(16)$500($8,000)13Purchase10$520$520016Sale(6)$506.66(3040)16Discount(200)(240)839601511760Closing Inventory =3960+11760=15720Cost of goods sold = 8000+3040 =$11040

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