Instructions: Use the following balance sheet information from Aggie Health and Fitness Centers month-end financial statements dated August 31, 2016 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 Health and Fitness Center

Balance Sheet

As of August 31, 2016

Assets: Liabilities:

Cash $4,500 Accounts Payable $2,900

Accounts Receivable 6,500 Salaries Payable 5,600

Inventory Concessions 1,100 Interest Payable 1,375

Supplies 400 Unearned Revenue 500

Prepaid Insurance 4,400 Note Payable 330,000

Total Current Assets 16,900 Total Current Liabilities 340,375

Land 80,000 Stockholders Equity

Building 408,000 Common Stock 245,500

Equipment 67,200 Retained Earnings 3,563

Furniture and Fixtures 20,016 Total Liab. and SHE $589,438

Accumulated Depreciation (2,678)

Total Assets $589,438

Fiscal Year

Aggie Health and Fitness Center was established as a business in August 2016. 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, 2016 for $4,800.

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, 2016. The total purchase price amounted to $488,000. On the date of purchase the land was appraised at $80,000 and the building was appraised at $408,000. The Health and Fitness Center paid $158,000 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, 2016. 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 $80,000 $80,000

Building 408,000

Less: Accumulated Depr 1,700 406,300

Equipment 67,200

Less: Accumulated Depr 700 66,500

Furniture and Fixtures 20,016

Less: Accumulated Depr 278 19,738

Net Plant, Property, and Equipment $572,538

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).

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.

TRANSACTIONS:

TRANSACTION #	DATE	TRANSACTION DESCRIPTION
1	Sept 1	Purchased a 3-month advertising campaign to be broadcast on local radio stations during the months of September, October and November. Paid $1,500 in advance for this ad campaign.
2	Sept 1	Sold 160, twelve-month memberships to the Fitness Center for $420 each. All membership dues were collected in cash.

What are the journal entries for Transactions #1 and #2?

A.

Cash	1,500
Prepaid Advertising	1,500
Cash	67,200
Unearned Revenue	67,200

B.

Prepaid Advertising	1,500
Cash	1,500
Cash	67,200
Unearned Revenue	67,200

C.

Cash	1,500
Prepaid Advertising	1,500
Cash	67,200
Service Revenue	67,200

D.

Prepaid Advertising	1,500
Accounts Payable	1,500
Cash	67,200
Service Revenue	67,200

Please select the correct answer choice.