Run For Your Life, Inc. is a wholesaler of high-end running gear. The founders, Zoey Smith and Brooke Johnson, have done their research with regards to product development, marketing, customers, and brand recognition, however, they did not keep valid accounting records. Now, one year later, the founders realize that they need to prepare some financial statements to understand how the business performed. You have run a few races with Zoey and Brooke in the past and have developed a friendship. You have decided to help them develop their financial statements.

Start-Up Funding:

On the date of incorporation, each founder invested $25,000, for 250 shares of common stock each. In addition they borrowed $175,000 from Obelisk Bank and Trust with interest terms of 2.5% payable annually, and principal due in full at the end of eight years. Incorporation costs (legal fees, etc.) amounted to $1,200.

Expenses and Purchases:

Based on the stack of receipts the founders maintained and their bank statements, Run For Your Life had the following cash disbursements during the year.

Rent (Office and Warehouse)	8,000
Security Deposit (Office and Warehouse)	1,000
Wages and salaries	11,000
Furniture, fixtures and equipment	15,000
IT hardware and software	13,000
Utilities, phone, internet	5,000
Office supplies	1,200
Insurance	4,200
Advertising	3,000

Additional notes for expenses and purchases:

The office and warehouse space was leased on 1/1/2020 and a full year of rent expense and the security deposit were paid for on 1/1/2020.

The furniture, fixtures and equipment are expected to last for 6 years with no salvage value. The IT hardware and software is expected to last for 4 years and they hope to sell it for $1,000.

Insurance premiums are due every 6 months. Run For Your Life paid insurance premiums on 1/1/2020, 7/1/2020 and 12/31/2020 (to prepay insurance premiums for the first 6 months of 2021). There were no insurance premium increases.

Inventory:

The company made the following purchases of inventory in 2020:

Date	Item #	Item Description	Cost	Price	Quantity
1/1/2020	1310	Motion Control Shoes	$95.00	$150.00	80
2/1/2020	1311	Stability Shoes	$105.00	$175.00	60
3/15/2020	1312	Cushioning Shoes	$105.00	$210.00	50
7/15/2020	1313	Wool Socks	$15.00	$24.00	100
8/12/2020	1314	Compression Socks	$25.00	$41.00	75
10/1/2020	1315	Foam Roller	$20.00	$35.00	20
12/15/2020	1316	GPS Tracker (Smart Watch)	$185.00	$250.00	90

Run For Your Life purchased all inventory on credit. At 12/31/2020, all purchases had been paid except for the GPS Trackers (Item #1316) purchased on 12/15/2020.

Sales:

Sales records needed to be rebuilt as the founders did not document these transactions and even lost some of their records. Based on the inventory left at year-end, below is what is assumed to have been sold during the year.

Item #	Item Description	Quantity Sold
1310	Motion Control Shoes	70
1311	Stability Shoes	45
1312	Cushioning Shoes	35
1313	Wool Socks	80
1314	Compression Socks	70
1315	Foam Roller	10
1316	GPS Tracker (Smart Watch)	85

Bank records indicate, however, that payment has been received for all purchases except for 30 of the GPS Trackers and 5 of the Foam Rollers which were sold during the last week of the year.

General Ledger:

The founders of Run For Your Life had a CPA help them develop their general ledger back in 2019 when the company was just a concept. The owners understand the purposes of these accounts and would like for you to use these accounts only as you create their manual AIS system.

Account Number	Account Description
10000	Cash
11200	Accounts receivable
11300	Inventory
11400	Security deposits
11500	Prepaid insurance
15000	Furniture, fixtures, and equipment
15500	IT hardware and software
16000	Accumulated depreciation FF&E
16500	Accumulated depreciation IT H&S
20000	Accounts payable
25000	Loan payable
30000	Common stock
40000	Revenue
50000	Cost of goods sold
60000	Legal expense
60100	Rent expense
60200	Utilities, phone, internet expense
60300	Office supplies expense
60400	Insurance expense
60500	Advertising expense
60600	Wages and salaries expense
65000	Depreciation expense FF&E
65500	Depreciation expense IT H&S
70000	Interest expense

Required:

Your job is to complete the accounting cycle for this company since inception through year-end (2020). This includes:

1. Journal entries and adjusting journal entries
2. T-accounts
3. Trial Balance
4. Complete set of Financial Statements (Income Statement, Balance Sheet,)