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To: You From: Team Lead Subject: Prepare Journal Entries - Run Forever Hi I am following up on the client we discussed earlier today in

To: You

From: Team Lead

Subject: Prepare Journal Entries - Run Forever

Hi

I am following up on the client we discussed earlier today in our huddle.

Running coaches and friends Dash, Sprint, and Bolt just bought a coaching company and gym, called Run Forever, from their friend, Speed. Theyve been the owners for the last quarter, but have no idea how to keep track of their business transactions and activities. Theyd like to buy a new treadmill for their gym, but dont know if they have the cash to do it. They did jot down all the money they spent and all the money they received for the last quarter:

1. Paid Speed $200,000 to purchase the business

2. Each owner put $10,000 into the company bank account as Contributed Capital on April 1, 2021

3. Paid rent for April, May, June, on the first of each month; and prepaid for July on June 30, 2021, at $3,000 per month

4. Collected $17,000 in cash for coaching services from clients who pay at the end of each session

5. Charged $11,000 on client credit cards for coaching services from clients who pay at the end of each session; still awaiting payout from credit card companies

6. Collected $5000 from credit card companies for coaching services that were previously paid by clients on credit card at the end of each session

7. Collected $6,000 in cash from clients who signed up for a pack of 10 coaching sessions. Of these clients, half of the sessions remain to be used, even though the clients have already paid Run Forever the cash

8. Purchased a new spin bike for the gym for $1000 on May 1, 2021. The bike has a useful life of 3 years

9. Used supplies throughout the quarter (paper towels, sanitizer, disposal masks). Did not keep track of the supplies used, but you went and checked their inventory and calculated that about $1,800 of supplies is still left

10. Did not pay or record salaries for themselves, totaling $60,000 for the quarter

11. Paid salaries for two coaches on June 30, 2021, totaling $10,000

12. Insurance on the gym was prepaid by the previous owner for the entire 12 months starting January 1, 2021. Three months passed this quarter under the new owners.

13. Paid off a balance of $7,000 that had been owed on previously purchased weights and benches with a local supplier, leaving the company with no outstanding debt.

They also gave us financial statements created by the previous owner for the quarter ended March 31, 2021, just before they bought the company on April 1, 2021.

Record the list of transactions as journal entries and prepare a new set of financial statements for the current period that include the additional entries from the client. Complete the following tasks in Excel:

Prepare journal entries to record the effect of the transactions and activities listed in the email. Indicate whether each entry is a regular journal entry or an adjusting journal entry. If it is an adjusting journal entry, what makes it so?

Revise the financial statements after the journal entries are posted. Be sure that all financial information is consistent across all statements.

Your Team Lead

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image text in transcribed
Run Forever Statement of Stockholder's Equity for the Quarter Ended March 31, 2021 Run Forever Balance Sheet As of March 31, 2021 ASSETS \begin{tabular}{|c|c|c|c|c|} \hline \multicolumn{3}{|l|}{ Cash } & $ & 80,000 \\ \hline \multicolumn{3}{|c|}{ Accounts Receivable } & $ & 5,000 \\ \hline \multicolumn{3}{|c|}{ Supplies inventory } & & 4,000 \\ \hline Equipment & $ & 50,000 & & \\ \hline \multirow[t]{2}{*}{\begin{tabular}{l} less: \\ accumulated \\ depreciation \end{tabular}} & $ & (30,000) & & \\ \hline & & & $ & 20,000 \\ \hline repaid insura & ance & & s & 3,000 \\ \hline \end{tabular} UABUTIES Accounts payable Total Labilities STOCKHOLDERS' EQUITY CommonStockRetainedEarnings$$18,00087,000 Total Stockholders' Equity $105,000 Total Assets $112,000 Total Liabilities + Stockholders' Equity $112,000 Run Forever Income Statement for the Quarter Ended March 31, 2021 Revenues Cost of Coaching Services (Coach Salaries) Gross Margin Rent Expense Insurance Expense Depreciation Expense Supplies Expense \begin{tabular}{ll} $ & 70,000 \\ $ & 35,000 \\ $ & 35,000 \end{tabular} Total Expenses $(3,000) $(1,000) $(2,500) $(500) $(7,000) Net Income $28,000

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