Background: Prepare the financial statements for following Bakers Bikes. Bakers Bikes is a local bike repair, sales and service shop specializing in road bikes. Bakers Bikes earns revenue through a.) service of bicycles b.) selling new bicycles.

Assignment: Create journal entries, trial balance, close the accounts and prepare four financial statements.

Conditions & Constraints:

Under the following circumstances. Transactions occur only once (unless otherwise indicated).

The accounting period is from January 1, 2021 until December 31,2021

Bakers bikes records cost-of-good sold under the FIFO method.

Assets unless otherwise indicated should be amortized under straight-line amortization.

All the types of bikes can be recorded as bikes.

Unless specified on account all transactions are in cash.

Principles:

Payroll

Adjusting of Accounts

Closing the Accounts

One Year of Financial Transactions, for the period :

Date Activity Notes

1/12 Tim Baker deposits $10,000 of his own capital to start the business.

1/14 Tim Baker purchases branding and advertising materials for $500 * Advertising Expenses

1/17 Baker purchases a stand and tools with a useful life of 20 years for $1,000 * Equipment

1/18 Baker purchases office equipment including a laptop for $1000 cash.

2/1

2/1 Tim hires Sachin Patel, to run the sales floor and fix bikes. Sachin will work 30 hours per week and receive

2/5 Tim buyers ten bicycles on account from Scott for $500 each on account terms 2/10 n 30

2/6 Tim sells 2 bikes for $1100 each.

2/10 Tim collects performs services on account for Jacob for $75

2/1 Tim Baker buys three bicycles merchandise on account $1,500 term 2/10 n 30.

2/14 Sells 3

3/1

3/1 Tim buys a one year business insurance policy for $100 per month.

3/1 Tim Baker sells his long-lived assets. Record depreciation

3/1 Tim sells two bicycles to a couple for $1000 each for cash.

3/2 Tim performs 3 tune ups for $50 each.

3/4 Tim performs three tune ups for $50 each.

3/5 Sachin sells 3 bikes at $1100 each.

3/10 Tim buys merchandise inventory from Giant Bikes of 5 bikes on account shipping terms destination for $500 each, credit terms 2/12 n 20.

3/20 Tim pays his bill to Giant Bikes.

3/ 20 Tim pays his bill with Scott Bikes.

3/30 Tim sells three bikes to Arnold for $1000 each. $2000 was paid in cash.

4/1

4/1 Tim buys 10 bikes from his supplier for $300 each.

4/10 Tim purchases advertising space in a Sports & Bikes, a local magazine for $100 one month on account starting 5/1.

4/10 Thomas returns on of the bikes for a full refund.

4/20 A small marketing company is hired to help building a website and social media advertising. The marketing company charges a total $1500, although $2000 is paid for future work on social media account although terms are not settled.

5/1

Tim purchases an air pump for $200 with 1000 ft^3 of gas, meant to service 5,000 tires with a residual value of $20.

Tim sells 1 bike for cash $2200.

Sachin sells 2 bikes for $1500 and $1600.

6/1

6/1 Tim forms a partnership with a another local bike shop Bobs Bikes to form Bob & Bakers Bikes with a 50/50 slip for the contribution of 30 bicycles, and $5,000 with no other bicycles.

6/1 Tim pay his bill with Sports & Bikes.

6/12 Bob & Bakers Bikes sells 3 bikes.

6/20 Merchandise inventory of 10 bikes are purchased for $600 per bike on account, credit terms 2/5 n 10.

7/1

7/1 Bob & Bakers Bikes sells the equipment and tools purchased for $1000 for $600.

7/5 3 bikes are sold for $1000 each.

7/6 2 bikes are stolen.

8/1

8/1 Bob & Bakers Bikes sells 5 bikes for $1000.

8/1 Bob & Bakers Bikes performs 2 tune ups for $50 each.

8/10 Tim purchases merchandise inventory of 10 bikes from Giant for $250 on account.

9/1

9/1 Bob & Bakers Bikes raised long-term debt of $5,000.

9/10 Bob & Bakers Bikes sells 4 bikes for $1,000 each.

10 / 1

10/1 Bob & Bakers Bikes buys shares 10 shares of ABC company for $1000.

10/2 Bob & Bakers Bikes determine to pay themselves a salary of $1,000 a month.

10/5 Bob & Bakers Bikes performs 5 tune-ups for $50 each.

10/6 Bob & Bakers Bikes sells 3 bikes for $2,000 each.

11/1

Bob & Bakers Bikes sells 5 their shares of ABC company for $400.

Action Plan

a.) Create a journal entries for all the above transactions.

b.) Prepare a general ledger and trial balance for all above transactions

c.) Prepare financial statements for all the above transactions.

d.) Calculate the following ratios

a. Current Ratio

b. Profit Margin

c. Return on Equity