AC1220 ACCOUNTING I
Project Part 1
Project Part 1: The Accounting Cycle
Karen Harris starts her own scooter retail business, City Rides, on December 1, 20×2. The business
operates as a proprietorship from a rented space near a busy downtown area. Harris hires Jim Waters as
the sales associate and assistant manager of the business. The following transactions take place during
December 20×2.
Transactions
Dec. 1
1
2
2
2
9
12
13
16
18
30
30
30
30
Harris deposits $45,000 into the business bank account. In exchange, she receives
capital in the proprietorship.
Harris writes and mails check #001 for $2,400 for rent. The rent payment covers rent
for the three months ended February 28, 20×2.
Harris purchases office equipment for $1,800 by check #002.
Harris purchases office supplies for $420 by check #003.
Harris purchases 20 Model X mopeds at $500 each and 15 Model L mopeds at $800
each, costing a total of $22,000, on account from a supplier, Fun Brands:
Harris elects to use the first-in-first-out (FIFO) method to account for
inventory.
Fun Brands provides an invoice with the following terms: 2/10 net 30.
In the first week of operation, City Rides sells 16 Model X mopeds at $750 each: 10 are
sold on account, and the rest are sold for cash.
City Rides makes payment to Fun Brands in full settlement of accounts payable by
check #004. Payment is net of the purchase discount. Hint: The terms are 2/10 net 30,
and any purchase discount received reduces the cost of inventory.
City Rides purchases 10 Model X mopeds from Fun Brands on account at a cost of
$520 each.
The sales for the week are as follows: 6 Model X mopeds sold on account for $750
each—inventory cost accounted using the FIFO method.
Cash receipts from customers on accounts receivable are $7,100.
Sales for the rest of December are as follows: 2 Model L mopeds sold for cash for
$1,100 each.
Harris receives the utilities bill for December 20X2 for $650, still payable at month
end.
Harris pays wages amounting to $1,800 by check #005.
Harris withdraws $2,500 in cash.
Page 1
AC1220 ACCOUNTING I
Project Part 1
The Chart of Accounts
The ledger of City Rides is composed of the following accounts. Classify each account by account type.
Choose from among the following items:
Asset
Contra-asset
Liability
Owner’s equity
Account Name
Account Type
Cash
Accounts Receivable
Supplies
Prepaid Rent
