Project Part 1: The Accounting CycleKaren Harris starts her own scooter retail business, City Rides, on December 1, 20×2. 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 20×2.TransactionsDec. 1Harris deposits $45,000 into the business bank account. In exchange, she receives capital in the proprietorship.1Harris writes and mails check #001 for $2,400 for rent. The rent payment covers rent for the three months ended February 28, 20×2.2Harris 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 $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 30.9In 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.12City 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.

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 $750 eachinventory 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 December 20X2 for $650, still payable at month end.30Harris pays wages amounting to $1,800 by check #005.30Harris withdraws $2,500 in cash.The Chart of AccountsThe ledger of City Rides is composed of the following accounts. Classify each account by account type. Choose from among the following items:Asset Contra-asset Liability Owners equityAccount NameAccount TypeCashAccounts ReceivableSuppliesPrepaid RentInventoryOffice EquipmentAccumulated DepreciationOffice EquipmentAccounts PayableCapitalHarrisWithdrawalsHarrisIncome SummarySales RevenueCost of Goods SoldWages ExpenseRent ExpenseDepreciation ExpenseOffice EquipmentSupplies ExpenseComplete the following schedule to track the purchase and sale of inventory items during December 20×2. Use the FIFO method to account for the cost of goods sold. The first inventory purchase and sale are included as an example.MODEL XMODEL LDatePurchase (sale)QuantityCost per unitTotalDatePurchase (sale)QuantityCost per unitTotalDec. 2Purchase20$500$10,000Dec. 2purchase15$800$12,0009(Sale)(16)$500($8,000)30131616Task 1: Making Journal EntriesJournalize the transactions for December 20×2. The first three transactions are journalized already. Use the following template to make journal entries and check off transactions as they are entered, using the check boxes. Double-click each check box and select checked in the dialog box. Click the OK button to check.DateAccount and ExplanationDebitCreditDec 1Cash$45,000Capital$45,000To record owner contribution1Prepaid Rent$2,400Cash$2,400To record prepaid expenseDateAccount and ExplanationDebitCreditTask 2: Using the Accounting WorksheetAdjustmentsDec. 31Depreciation on office equipment, $36031Supplies used, $30031Recognized rent expenseprepaid rent accountComplete the worksheet provided on the next page by making the adjustments described. Compute adjusted trial balance amounts and enter account balances into the income statement and balance sheet columns, where necessary.City RidesAccounting WorksheetFor the Month Ended Dec. 31 20x2AccountTrial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance SheetDebitCreditDebitCreditDebitCreditDebitCreditDebitCreditCash$19,020Accounts Receivable12,000Prepaid Rent2,400Supplies420Inventory15,720Office Equipment1,800Accumulated DepreciationOffice Equipment-Accounts Payable$5,850CapitalHarris45,000WithdrawalsHarris2,500Sales Revenue16,500Cost of Goods Sold11,040Wages Expense1,800Rent Expense-Depreciation ExpenseOffice Equipment-Utilities Expense650Supplies Expense-Total$67,350$67,350Net IncomeTOTALTask 3: Preparing Financial Statements and Closing the AccountsUsing the following adjusted trial balance amounts, prepare the income statement, the statement of owners equity, and the balance sheet of City Rides for the month ended December 31, 20×2.City RidesTrial BalanceDecember 31, 20x2AccountDebitCreditCash$19,020Accounts Receivable12,000Prepaid Rent1,600Supplies120Inventory15,720Office Equipment1,800Accumulated DepreciationOffice Equipment360Accounts Payable5,850CapitalHarris45,000WithdrawalsHarris2,500Sales Revenue16,500Cost of Goods Sold11,040Wages Expense1,800Rent Expense800Depreciation ExpenseOffice Equipment360Utilities Expense650Supplies Expense300$67,710$67,710City RidesIncome StatementFor the Year Ended December 20x2Sales RevenueLess Expenses:Net IncomePreparing Financial StatementsCity RidesStatement of Owners EquityFor the Year Ended December 20x2Beginning CapitalEnding Capital, HarrisCity RidesBalance SheetDecember 31, 20x2AssetsLiabilitiesOwners EquityTotal AssetsTotal Liabilities and Owners EquityClosing Temporary AccountsUsing the journal template given, make the following closing entries. Use the revenue, expense, and withdrawals balances given before.Closing Entries31Closed Sales Revenues to Income Summary Account31Closed Expense Accounts to Income Summary Account31Closed Income Summary Account to CapitalHarris, Account31Closed WithdrawalsHarris Account to Capital AccountDateAccount and ExplanationDebitCreditDec 31To close sales revenue to income summary31To close expenses to income summary31To close income summary30To close withdrawals account—End of Project Part 1—Project Part 1: The Accounting CycleKaren Harris starts her own scooter retail business, City Rides, on December 1, 20×2. 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 20×2.TransactionsDec. 1Harris deposits $45,000 into the business bank account. In exchange, she receives capital in the proprietorship.1Harris writes and mails check #001 for $2,400 for rent. The rent payment covers rent for the three months ended February 28, 20×2.2Harris 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 $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 30.9In 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.12City 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.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 $750 eachinventory 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 December 20X2 for $650, still payable at month end.30Harris pays wages amounting to $1,800 by check #005.30Harris withdraws $2,500 in cash.The Chart of AccountsThe ledger of City Rides is composed of the following accounts. Classify each account by account type. Choose from among the following items:Asset Contra-asset Liability Owners equityAccount NameAccount TypeCashAccounts ReceivableSuppliesPrepaid RentInventoryOffice EquipmentAccumulated DepreciationOffice EquipmentAccounts PayableCapitalHarrisWithdrawalsHarrisIncome SummarySales RevenueCost of Goods SoldWages ExpenseRent ExpenseDepreciation ExpenseOffice EquipmentSupplies ExpenseComplete the following schedule to track the purchase and sale of inventory items during December 20×2. Use the FIFO method to account for the cost of goods sold. The first inventory purchase and sale are included as an example.MODEL XMODEL LDatePurchase (sale)QuantityCost per unitTotalDatePurchase (sale)QuantityCost per unitTotalDec. 2Purchase20$500$10,000Dec. 2purchase15$800$12,0009(Sale)(16)$500($8,000)30131616Task 1: Making Journal EntriesJournalize the transactions for December 20×2. The first three transactions are journalized already. Use the following template to make journal entries and check off transactions as they are entered, using the check boxes. Double-click each check box and select checked in the dialog box. Click the OK button to check.DateAccount and ExplanationDebitCreditDec 1Cash$45,000Capital$45,000To record owner contribution1Prepaid Rent$2,400Cash$2,400To record prepaid expenseDateAccount and ExplanationDebitCreditTask 2: Using the Accounting WorksheetAdjustmentsDec. 31Depreciation on office equipment, $36031Supplies used, $30031Recognized rent expenseprepaid rent accountComplete the worksheet provided on the next page by making the adjustments described. Compute adjusted trial balance amounts and enter account balances into the income statement and balance sheet columns, where necessary.City RidesAccounting WorksheetFor the Month Ended Dec. 31 20x2AccountTrial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance SheetDebitCreditDebitCreditDebitCreditDebitCreditDebitCreditCash$19,020Accounts Receivable12,000Prepaid Rent2,400Supplies420Inventory15,720Office Equipment1,800Accumulated DepreciationOffice Equipment-Accounts Payable$5,850CapitalHarris45,000WithdrawalsHarris2,500Sales Revenue16,500Cost of Goods Sold11,040Wages Expense1,800Rent Expense-Depreciation ExpenseOffice Equipment-Utilities Expense650Supplies Expense-Total$67,350$67,350Net IncomeTOTALTask 3: Preparing Financial Statements and Closing the AccountsUsing the following adjusted trial balance amounts, prepare the income statement, the statement of owners equity, and the balance sheet of City Rides for the month ended December 31, 20×2.City RidesTrial BalanceDecember 31, 20x2AccountDebitCreditCash$19,020Accounts Receivable12,000Prepaid Rent1,600Supplies120Inventory15,720Office Equipment1,800Accumulated DepreciationOffice Equipment360Accounts Payable5,850CapitalHarris45,000WithdrawalsHarris2,500Sales Revenue16,500Cost of Goods Sold11,040Wages Expense1,800Rent Expense800Depreciation ExpenseOffice Equipment360Utilities Expense650Supplies Expense300$67,710$67,710City RidesIncome StatementFor the Year Ended December 20x2Sales RevenueLess Expenses:Net IncomePreparing Financial StatementsCity RidesStatement of Owners EquityFor the Year Ended December 20x2Beginning CapitalEnding Capital, HarrisCity RidesBalance SheetDecember 31, 20x2AssetsLiabilitiesOwners EquityTotal AssetsTotal Liabilities and Owners EquityClosing Temporary AccountsUsing the journal template given, make the following closing entries. Use the revenue, expense, and withdrawals balances given before.Closing Entries31Closed Sales Revenues to Income Summary Account31Closed Expense Accounts to Income Summary Account31Closed Income Summary Account to CapitalHarris, Account31Closed WithdrawalsHarris Account to Capital AccountDateAccount and ExplanationDebitCreditDec 31To close sales revenue to income summary31To close expenses to income summary31To close income summary30To close withdrawals account—End of Project Part 1—