ACP Individual Project Spring 2019 Version 2 a- Search in Document tShare A Home Insert Design Layout References Mailings Review One Page EE Multiple Pages (> Page width Gridlines Draft Focus Print Web Layout Layout Zoom Zoom New Arange Split Window All Navigation Pane to100% Accounting Project Version 2 Cherry&White Bike Company The Cherry &White Bike Company is a small closely-held company with two owners. Its two owners, Charlotte and George, have decided to expand the business. You are CWB's accountant. Your responsibilities include maintaining all accounting records and preparing annual financial statements CWB wants to take out a loan to expand its business in the coming year. The banks and lending institutions require a set of financial statements prepared under U.S. GAAP to evaluate CWB's credit worthinesS. You must prepare a complete set of financial statements including the notes to the financial statements for the quarter ending March 31, 2019. You need to choose CWB's accounting policies and methods for areas including inventory cost flow, revenue recognition, and depreciation. You will need to consider the proper classification of assets and liabilities as current and non-current on the balance sheet To obtain a loan with the lowest interest rate available, CWB needs to show high profitability and strong liquidity and solvency. You realize the common financial statement analysis ratios for profitability, solvency and liquidity will depend on the accounting methods you choose. So, you carefully analyze the accounting choices in light of common financial statement ratios. The owners also have expressed to you that they need to know their inventory and cost of goods sold to manage purchases and pricing. So, you are highly considering using a perpetual inventory system. You are presented with a trial balance as of the end of 2018 and must add the transactions and activities that occurred in the first quarter of 2019 as listed below. You can add accounts to the trial balance, as needed. In the first quarter of 2019 Cherry & White Bikes had the following transactions January 1: The owners hire Nina Marton to manage the store, paying her a salary or $2,600 a month. Lisa is paid on the 1st of every month, starting on February 1 (which would represent her January pay). They have one other employee who they pay $1,700 a month, also on the 1 of the following month. Employees work 40 hours a week. January 14: Paid utilities for 4th quarter of 2018, $775 E - Focus 1227 Words English (US) Page 1 of 6 ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review One Page EEl Multiple Pages (> Page width Gridlines Draft Focus Print Web Layout Layout Zoom Zoom New Arange Split Switch WindowS Macros Navigation Pane to100% Window All work 40 hours a week. January 14: Paid utilities for 4h quarter of 2018, $775 February 1 Installed new light fixtures and display cases in the leased store. CWB paid 51,800 for the fixtures, 5100 for shipping to the store, and $500 to an electrician to install, CWB paid 6% sales tax on the fixtures and shipping in addition to the cost of the fixtures and equipment. It did not pay a sales tax to the electrician. The landlord gave CWB permission to remove and dispose of the old fixtures. CWB sold the old fixtures for $220. CWB anticipates being in the store for at least 5 years. CWB cannot take the light fixtures with them if they relocate as they will revert to the lessor CWB can take the display cases if they move. The display cases cost $3,000. CWB also incurred 6% sales tax on the display cases on addition to their cost. Both the display cases and light-fixtures have a seven-year useful life. February 10: CWB made a payment of $6,200 on its accounts payable March 1: CWB invests in a $4,000 3-month treasury bill paying interest of 3.0%. March 12: One of the standard bikes sold on February 21 was returned by the customer The bike sold for $400. CWB provided a full refund. CWB's policy is to provide a customer with a full refund within 30 day of purchase as long as the bike is retuned in good condition. While the bike is in good working condition, CWB does not anticipate being able to sell the bike as new - rather it anticipates marking it down and selling it for $190. March 24: A customer puts down a deposit of $600 on a high-end racing bike that sells for $2,900. CWB ordered the bike from the manufacturer. The manufacturer promises CWB will have the bike at the store on April 3 13. Here is other information on other activity and recurring transactions that occurred during the period a) CWB offers bike tune-ups for $80 each. CWB's employee is an expert tune-ups, taking about one hour per bike for a tune-up. Below is the number of tune-ups performed in each month. All customers pay in cash. (For recording the transactions, you can 1227 Words English (US) Page 1 of 6 ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages Gridlines Zoom ZoomPae width Draft Focus Print Web Layout Layout New Arange Split Window All Navigation Pane to 100% Here is other information on other activity and recurring transactions that occurred during the period. a) CWB offers bike tune-ups for $80 each. CWB's employee is an expert tune-ups, taking about one hour per bike for a tune-up. Below is the number of tune-ups performed in each month. All customers pay in cash. (For recording the transactions, you can assume all tune-ups are done the last day of the month). Number Month February March b) CWB has the following purchases and sales of standard bikes during the quarter. : Date Beginning Inventory January 25 February February 14 February 27 March 26 le 32 Sale Sale Purchase March le All purchasers of standard bikes are given the option of buying a bike for $400, or a bike with two years of tune-ups for $500. Four of the bikes sold on February 21st were sold with the tune-up option All purchases were made using cash except the March 2nd purchase for which CWB obtained two-months credit from the bike supplier c) CWB took out a five-year loan for $10,000 with an interest rate of 15% on January 1, 2018. The loan matures on January 1, 2022 d) CWB rents its premises for S1,000 per month, with rent due on the 15at of the prior month. e) CWB has a business insurance policy, which it purchased for 3,300 on July 1, 2018. The oolicv runs until June 30, 2019 Page 3 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages (> Page width Gridlines Print Web Layout Layout Draft Zoom Zoom New Arange Split Window All Switch WindowS Macros Navigation Pane to100% month CWB has a business insurance policy, which it purchased for $3,300 on July 1, 2018. The policy runs until June 30, 2019 e) t) CWB owns various tools and equipment which it pools for purpose of calculating depreciation. In the past it has used straight-line depreciation over a ten-year period with no scrap or salvage value for these assets. However, with technology changing rapidly, CWB questions whether it will have to replace the equipment earlien g) On March 31, CWB had $187 of supplies left in the supply room. h) On April 7 received its utilities bill for the first quarter of 2019 5700. i) The tax rate is 20%. Chart of Accounts Group | Account Title Account # 1 100: Assets 101 Cash 102 Accounts receivable 103 Store supplies 104 Prepaid rent 105 Prepaid insurance 106 Prepaid advertisin 110 I 11 Inventory racing bikes 112 Inventory standard bikes Inv chlldren's bikes 115 Inventory - bike supplies 120 Equipment 122 Accumulated depreciation equipment 201 Accounts payable 205 Utilities payable 210 200: Liabilities Unearned sales revenue Unearned service revenue 220 Salaries payable 225 Taxes payable 230 240 Loans payable 301 Interest payable Capital stock 310 Retained earning 320 Dividends declared Page 3 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages (> Page width Gridlines Print Web Layout Layout Zoom Zoom New Arange Split Window All Switch Macros Navigation Pane to100% 100: Assets 101 Cash 102 Accounts receivable 103 Store supplies 104 Prepaid rent 105 Prepaid insurance 106 Prepaid advertising Inventory standard bikes 11 Inventory racing bikes 112 Inventory-children's bikes 115 Inventory-bike supplies 120 Equipment 122 Accumulated depreciation equipment 201 Accounts payable 205 Utilities payable 210 Unearned sales revenue 215 Unearned service revenue 220 Salaries payable 225 Taxes payable 230 240 Loans payable 301 200: Liabilities Interest payable 300: Equtty Capital stock Retained earnings 320Dividends declared 400: Revenues 01 Sales 405 Sales returns 410 Service revenue 500 Cost of goods sold 505 Cost of bike supplies 500: Expenses 511 Salaries expense Utilities expense 513 Selling expense 514 515 Rent expense Administrative expense Insurance expense Store supplies exp 518 Advertising expense 520 Depreciation expense 530 Interest 540 Tax expense expense 600: Other Income summary Page 5 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page Outline Gridlines Print Web Layout Layout Focus Zoom Zoom New Arange Split Window All Switch WindowS Macros (> Page width Navigation Pane to100% Interest expense Tax expense Income summary 540 600: Other Cherry &White Bike Company Post Closing Trial Balance 2/31/2018 Account Title Debit Credit 30,850 1,000 2,912 Store supplies Prepaid rent Prepaid insurance Inventory-standard bikes (25 bikes) 18,000 Accumulated depreciation -equipment Accounts payable Utilities payable Salaries payable Interest payable Loans payable Capital stock Retained Earnings 3,800 1,700 1,500 10,000 24,000 4,453 Page 5 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document tShare A Home Insert Design Layout References Mailings Review One Page EE Multiple Pages (> Page width Gridlines Draft Focus Print Web Layout Layout Zoom Zoom New Arange Split Window All Navigation Pane to100% Accounting Project Version 2 Cherry&White Bike Company The Cherry &White Bike Company is a small closely-held company with two owners. Its two owners, Charlotte and George, have decided to expand the business. You are CWB's accountant. Your responsibilities include maintaining all accounting records and preparing annual financial statements CWB wants to take out a loan to expand its business in the coming year. The banks and lending institutions require a set of financial statements prepared under U.S. GAAP to evaluate CWB's credit worthinesS. You must prepare a complete set of financial statements including the notes to the financial statements for the quarter ending March 31, 2019. You need to choose CWB's accounting policies and methods for areas including inventory cost flow, revenue recognition, and depreciation. You will need to consider the proper classification of assets and liabilities as current and non-current on the balance sheet To obtain a loan with the lowest interest rate available, CWB needs to show high profitability and strong liquidity and solvency. You realize the common financial statement analysis ratios for profitability, solvency and liquidity will depend on the accounting methods you choose. So, you carefully analyze the accounting choices in light of common financial statement ratios. The owners also have expressed to you that they need to know their inventory and cost of goods sold to manage purchases and pricing. So, you are highly considering using a perpetual inventory system. You are presented with a trial balance as of the end of 2018 and must add the transactions and activities that occurred in the first quarter of 2019 as listed below. You can add accounts to the trial balance, as needed. In the first quarter of 2019 Cherry & White Bikes had the following transactions January 1: The owners hire Nina Marton to manage the store, paying her a salary or $2,600 a month. Lisa is paid on the 1st of every month, starting on February 1 (which would represent her January pay). They have one other employee who they pay $1,700 a month, also on the 1 of the following month. Employees work 40 hours a week. January 14: Paid utilities for 4th quarter of 2018, $775 E - Focus 1227 Words English (US) Page 1 of 6 ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review One Page EEl Multiple Pages (> Page width Gridlines Draft Focus Print Web Layout Layout Zoom Zoom New Arange Split Switch WindowS Macros Navigation Pane to100% Window All work 40 hours a week. January 14: Paid utilities for 4h quarter of 2018, $775 February 1 Installed new light fixtures and display cases in the leased store. CWB paid 51,800 for the fixtures, 5100 for shipping to the store, and $500 to an electrician to install, CWB paid 6% sales tax on the fixtures and shipping in addition to the cost of the fixtures and equipment. It did not pay a sales tax to the electrician. The landlord gave CWB permission to remove and dispose of the old fixtures. CWB sold the old fixtures for $220. CWB anticipates being in the store for at least 5 years. CWB cannot take the light fixtures with them if they relocate as they will revert to the lessor CWB can take the display cases if they move. The display cases cost $3,000. CWB also incurred 6% sales tax on the display cases on addition to their cost. Both the display cases and light-fixtures have a seven-year useful life. February 10: CWB made a payment of $6,200 on its accounts payable March 1: CWB invests in a $4,000 3-month treasury bill paying interest of 3.0%. March 12: One of the standard bikes sold on February 21 was returned by the customer The bike sold for $400. CWB provided a full refund. CWB's policy is to provide a customer with a full refund within 30 day of purchase as long as the bike is retuned in good condition. While the bike is in good working condition, CWB does not anticipate being able to sell the bike as new - rather it anticipates marking it down and selling it for $190. March 24: A customer puts down a deposit of $600 on a high-end racing bike that sells for $2,900. CWB ordered the bike from the manufacturer. The manufacturer promises CWB will have the bike at the store on April 3 13. Here is other information on other activity and recurring transactions that occurred during the period a) CWB offers bike tune-ups for $80 each. CWB's employee is an expert tune-ups, taking about one hour per bike for a tune-up. Below is the number of tune-ups performed in each month. All customers pay in cash. (For recording the transactions, you can 1227 Words English (US) Page 1 of 6 ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages Gridlines Zoom ZoomPae width Draft Focus Print Web Layout Layout New Arange Split Window All Navigation Pane to 100% Here is other information on other activity and recurring transactions that occurred during the period. a) CWB offers bike tune-ups for $80 each. CWB's employee is an expert tune-ups, taking about one hour per bike for a tune-up. Below is the number of tune-ups performed in each month. All customers pay in cash. (For recording the transactions, you can assume all tune-ups are done the last day of the month). Number Month February March b) CWB has the following purchases and sales of standard bikes during the quarter. : Date Beginning Inventory January 25 February February 14 February 27 March 26 le 32 Sale Sale Purchase March le All purchasers of standard bikes are given the option of buying a bike for $400, or a bike with two years of tune-ups for $500. Four of the bikes sold on February 21st were sold with the tune-up option All purchases were made using cash except the March 2nd purchase for which CWB obtained two-months credit from the bike supplier c) CWB took out a five-year loan for $10,000 with an interest rate of 15% on January 1, 2018. The loan matures on January 1, 2022 d) CWB rents its premises for S1,000 per month, with rent due on the 15at of the prior month. e) CWB has a business insurance policy, which it purchased for 3,300 on July 1, 2018. The oolicv runs until June 30, 2019 Page 3 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages (> Page width Gridlines Print Web Layout Layout Draft Zoom Zoom New Arange Split Window All Switch WindowS Macros Navigation Pane to100% month CWB has a business insurance policy, which it purchased for $3,300 on July 1, 2018. The policy runs until June 30, 2019 e) t) CWB owns various tools and equipment which it pools for purpose of calculating depreciation. In the past it has used straight-line depreciation over a ten-year period with no scrap or salvage value for these assets. However, with technology changing rapidly, CWB questions whether it will have to replace the equipment earlien g) On March 31, CWB had $187 of supplies left in the supply room. h) On April 7 received its utilities bill for the first quarter of 2019 5700. i) The tax rate is 20%. Chart of Accounts Group | Account Title Account # 1 100: Assets 101 Cash 102 Accounts receivable 103 Store supplies 104 Prepaid rent 105 Prepaid insurance 106 Prepaid advertisin 110 I 11 Inventory racing bikes 112 Inventory standard bikes Inv chlldren's bikes 115 Inventory - bike supplies 120 Equipment 122 Accumulated depreciation equipment 201 Accounts payable 205 Utilities payable 210 200: Liabilities Unearned sales revenue Unearned service revenue 220 Salaries payable 225 Taxes payable 230 240 Loans payable 301 Interest payable Capital stock 310 Retained earning 320 Dividends declared Page 3 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page EEl Multiple Pages (> Page width Gridlines Print Web Layout Layout Zoom Zoom New Arange Split Window All Switch Macros Navigation Pane to100% 100: Assets 101 Cash 102 Accounts receivable 103 Store supplies 104 Prepaid rent 105 Prepaid insurance 106 Prepaid advertising Inventory standard bikes 11 Inventory racing bikes 112 Inventory-children's bikes 115 Inventory-bike supplies 120 Equipment 122 Accumulated depreciation equipment 201 Accounts payable 205 Utilities payable 210 Unearned sales revenue 215 Unearned service revenue 220 Salaries payable 225 Taxes payable 230 240 Loans payable 301 200: Liabilities Interest payable 300: Equtty Capital stock Retained earnings 320Dividends declared 400: Revenues 01 Sales 405 Sales returns 410 Service revenue 500 Cost of goods sold 505 Cost of bike supplies 500: Expenses 511 Salaries expense Utilities expense 513 Selling expense 514 515 Rent expense Administrative expense Insurance expense Store supplies exp 518 Advertising expense 520 Depreciation expense 530 Interest 540 Tax expense expense 600: Other Income summary Page 5 of 6 1227 Words English (US) ACP Individual Project Spring 2019 Version 2 a- Search in Document + Share Home Insert Design Layout References Mailings Review View One Page Outline Gridlines Print Web Layout Layout Focus Zoom Zoom New Arange Split Window All Switch WindowS Macros (> Page width Navigation Pane to100% Interest expense Tax expense Income summary 540 600: Other Cherry &White Bike Company Post Closing Trial Balance 2/31/2018 Account Title Debit Credit 30,850 1,000 2,912 Store supplies Prepaid rent Prepaid insurance Inventory-standard bikes (25 bikes) 18,000 Accumulated depreciation -equipment Accounts payable Utilities payable Salaries payable Interest payable Loans payable Capital stock Retained Earnings 3,800 1,700 1,500 10,000 24,000 4,453 Page 5 of 6 1227 Words English (US)