A Practice Problem in Accounting Aggie Health and Fitness Center Fall 2023 Instructions: Use the following balance sheet information from Aggie Health and Fitness Centers month-end financial statements dated August 31, 2023 and open t-accounts for each balance sheet line item. Then use the enclosed TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations. Use the Perpetual Inventory method as discussed in class for all sales of merchandise. Aggie Heath and Fitness Center Balance Sheet As of August 31, 2023 Assets: Liabilities: Cash $3,200 Accounts Payable $22,900 Accounts Receivable 6,800 Salaries Payable 4,600 Inventory Concessions 800 Interest Payable 1,375 Supplies 350 Unearned Revenue 400 Prepaid Insurance 5,500 Note Payable 330,000 Total Current Assets 16,650 Total Current Liabilities 359,275 Land 50,000 Stockholders Equity Building 456,000 Common Stock 247,490 Equipment 67,200 Retained Earnings 3,560 Furniture and Fixtures 23,400 Total Liab. and SHE $610,325 Accumulated Depreciation (2,925) Total Assets $610,325 Notes to Financial Statements: Aggie Health and Fitness Center, a Texas corporation, is principally engaged in providing a fitness facility available to club members. Aggie Heath and Fitness Center offers all of the latest equipment and services including, group exercise, personal training, cardiovascular equipment, Pilates and yoga, and weight lifting. The Center also provides massage services. Fiscal Year Aggie Health and Fitness Center was established as a business in August 2023. Aggie Health and Fitness Center follows a fiscal year end of July 31. Inventories Inventories consist of concessions available for resale to members. These concessions consist of energy drinks, nutritional supplements, etc. Inventories are valued on a first-in, first-out basis, using the perpetual method. (Note: The Center plans to expand its inventory during September to include logo-based apparel.) Prepaid Insurance Aggie Health and Fitness Center carries property insurance through Good Hands Insurance Co. The Center purchased a 12 -month policy on August 1, 2023 for $6,000. Fixed Assets Property and Equipment are stated on the basis of historical cost. Land and Building: The Land and Building was a group purchase made on August 1, 2023. The total purchase price amounted to $506,000. On the date of purchase the land was appraised at $50,000 and the building was appraised at $456,000. The Health and Fitness Center paid $176,000 down and signed a $330,000, 12-month, 5% note for the balance. Depreciation on the building is computed using the straight-line basis with no salvage value. The life of the building is estimated to be 20 years. Equipment and Furniture and Fixtures: All equipment and furniture and fixtures were purchased for cash on August 1, 2023. Both equipment and furniture and fixtures are depreciated using the straight-line method of depreciation. No salvage value is anticipated. The useful life of the equipment is 8 years. The useful life of the furniture and fixtures is 6 years. The book values of these assets are presented below: Land $50,000 $50,000 Building 456,000 Less: Accumulated Depr 1,900 454,100 Equipment 67,200 Less: Accumulated Depr 700 66,500 Furniture and Fixtures 23,400 Less: Accumulated Depr 325 23,075 Net Plant, Property, and Equipment $593,675 Unearned Revenue The balance in the unearned revenue account is due to the sale of gift certificates redeemable for massage therapy. Revenue Recognition The Company recognizes service revenue upon providing services for customers. Sales revenue is recognized upon customer receipt of goods. Revenue for gift certificate sales is recognized at redemption. (Note: all memberships sold during the first month of operations were for one month only). Practice Problem in Accounting Aggie Health & Fitness Center Instructions Use the following TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations for Aggie Health & Fitness Center (The Fitness Center). Use the Perpetual Inventory method as discussed in class for all sales of merchandise. # Date Transaction 1 Sept 1 Sold 220, twelve-month memberships to the Fitness Center for $450 each. All membership dues were collected in cash. 2 Sept 1 Purchased office furniture for $6,480 from Aggie Furniture Company. The company paid 20% down in cash and the balance is due in 60 days. 3 Sept 1 Purchased a 3-month advertising campaign to be broadcast on local radio stations during the months of September, October and November. Paid $1,800 in advance for this ad campaign. 4 Sept 2 Paid wages due to employees on August 31 5 Sept 3 Purchased office supplies for $325 on an open account from Kellis Office Supplies. The Fitness Center has 30 days to pay for the supplies. 6 Sept 4 Purchased on account a total of 180 shirts with an embroidered Aggie Heath and Fitness Center logo from C&C Creations at a price of $15 per shirt. These shirts are available for resale to customers. 7 Sept 5 Paid $1,680 on accounts payable that were due on August 31. 8 Sept 7 Provided 60 hours of personal training services to members. Fees are charged at a rate of $55 an hour. The total amount was billed to individual members accounts. 9 Sept 9 Purchased concessions for $4,300 on account from Advocare Distributing, Inc. These concessions consist of energy drinks, nutritional supplements, etc., and are available for resale to customers. 10 Sept 10 Sold thirty-five shirts to a corporate member, Allen & Associates for $46 each. Collected $600 in cash and the balance is owed to the Fitness Center on account. 11 Sept 12 Paid the total amounts due to Kellis Office Supplies for the Sept. 3 transaction and C&C Creations for the Sept. 4 transaction. 12 Sept 14 Received $2,435 for services previously billed to customers accounts. 13 Sept 15 The concessions stand reported sales of merchandise for $5,900 for the first half of the month. The concessions that were sold had an original cost of $2,180. All of these transactions were billed directly to each members account. 14 Sept 15 Paid wages and salaries of $6,450 to Aggie Health and Fitness Center employees. 15 Sept 15 For the first half of September, provided 30 hours of massage therapy at a rate of $95/hour. Individual members accounts were billed for services provided. 16 Sept 18 A gift certificates totaling $95 was redeemed for massage therapy performed. 17 Sept 19 Collected the balance of what was owed on account from Allen & Associates for the Sept. 10 transaction. 18 Sept 20 Received a utility bill that totaled $425 for the month. It is due October 2. 19 Sept 21 Sold twenty-eight shirts to individual customers for $50 each. Collected 35% in cash, the balance is owed to Aggie Health and Fitness Center on account. 20 Sept 22 Made a cash sale of two gift certificates for $100 each. 21 Sept 25 The owners of the company invested an additional $10,000 into Aggie Health and Fitness Center in exchange for common stock. 22 Sept 26 Received $4,225 for services previously billed to customers accounts. 23 Sept 28 Purchased additional concessions for $2,500 from Advocare Distributing. The company paid cash for these concessions. 24 Sept 30 Purchased additional equipment for $16,000; paid $4,000 in cash and signed a two year, 4% note for the balance. 25 Sept 30 Fees for services the last half of September: Massage Therapy: $6,400 30% collected in cash Personal Training: $3,850 40% collected in cash 26 Sept 30 Concession sales for the last half of September: Credit sales: $1,420 Cash sales: $825 Cost of concessions sold: $725 27 Sept 30 Sold an additional 20 shirts for $52 each. All sales were cash sales. 28 Sept 30 Aggie Health and Fitness Center paid a dividend of $1,500 to its shareholders. Stop Here! Dont proceed with the adjusting entries (additional information below) until you have entered the transactions above, posted them to the ledger, and have the correct balance on the trial balance before adjustments on the worksheet. Additional Information: 1. At the end of the month, a physical count was taken of the Fitness Centers inventories. It revealed the following information: a. Ninety of the shirts for resale were on hand at September 30. b. Concession merchandise still on hand as of September amounted to $4,620. 2. Salaries earned by employees but unpaid on September 30 totaled $5,115. 3. Office Supplies still on hand on September totaled $150. Remember there are a total of 8 adjusting entries use the transaction materials to enter the remaining adjustments