On December 1, you and your friends invest $300,000 into the company in exchange for Let’s Dance common stock
Billy Bob’s Bikes
Accounting Cycle Project #3
BUS 2101 – Introduction to Financial Accounting
Mr. Steve Benne
Congratulations, you have just been hired by Billy Bob to do his accounting work. Billy
Bob does not like to be disappointed; therefore, he only hires
ight accounting students (that’s
why he hired YOU). Please, don’t let him down! You will work as his accountant during the
month of March. Billy Bob told you during the interview that his company uses a perpetual
inventory system. You are so excited!!! He told you that he would like the following
completed:
Colored Journal Entries from steps 2, 5, and 8 of the accounting cycle
Colored Ledger Accounts (T-Accounts) from steps 3, 5, and 8 of the accounting cycle
A Completed Worksheet in color for steps 4, 5, 6, and 7 of the accounting cycle
Colored Financial Statements. This should include a multi-step income statement, a
statement of retained earnings, and a classified statement of financial position.
A post-closing trial balance in color.
Additional things to consider:
Only 1 T-Account needs to be created for each account. See Chart of Accounts.
When doing journal entries, remember that debits come before credits and that both must
equal.
Remember, each time you post to the ledger account, you should put the reference number
in your general journal.
Assume the year is 2021 for your transactions and financial statements.
Do not procrastinate; it will only make things harder on you!!
Grading:
This is an individual project, however, you are always encouraged to work with a friend.
DO NOT simply copy your friends work, do your own work!!
This accounting cycle is worth a total of 150 points.
On Saturday, April 24th you will be required to turn in your project online in dropbox by
11:30pm. Late Fees = you will lose 10 points per day until 5 days have passed, then a
grade of zero.
Failure to use color will cost you up to 30 points.
This accounting cycle should be organized in the same order that the other accounting
cycles were. Failure to organize co
ectly will cost you up to 20 points.
Account Ledger # Account Ledger #
Cash 101 Accounts Payable 201
Accounts Receivable 102 Notes Payable 202
Inventory 103 Interest Payable 203
Supplies 104 Salaries Payable 204
Prepaid Insurance 105 Income Tax Payable 205
Land 106
Building 107
Accum Depr. - Building 108 Common Stock 301
Bike Machine 109 Retained Earnings 302
Accum Depr. - Bike Machine 110 Dividends 303
Cost of Goods Sold 501 Sales 401
Salaries Expense 502 Sales Returns & Allowances 402
Freight-Out 503 Sales Discounts 403
Depr. Exp. - Building 504
Utilities Expense 505
Supplies Expense 506
Depr. Exp. - Bike Machine 507
Interest Expense 508
Insurance Expense 509
Income Tax Expense 510
EXPENSES REVENUES
OWNER'S EQUITY
Create a T-Account for all accounts listed below. Don't forget to put them in color!!!
Billy Bob's Bikes
Chart of Accounts
ASSETS LIABILITIES
Billy Bob’s Bikes Transactions
1. March 1: Stockholder’s invest $777,777 into the company in exchange for Billy Bob’s Bikes
common stock.
2. March 1: Billy Bob paid in advance for a 6-month insurance policy, which will begin today. He
paid $7,074 cash for the policy.
3. March 1: Billy Bob purchased some land and a building for a total of $1,197,183 using $477,183
cash and then bo
owing the rest from the bank. Based on the total purchase price of $1,197,183,
the land was $276,543 and the building was the remainder. The loan from the bank will be paid off
over the next 16 years (1/16 of the principal will be paid off at the end of each year). The loan
ca
ies an interest rate of 9.22%. Interest accrued will be paid off at the end of every year. The
uilding has an expected life of 40 years and will be depreciated using the straight-line method.
4. March 2: Billy Bob purchased 15 bikes from Biker’s Bargains. Each bike cost $2,960 and the credit
terms are 4/15, n/30. (Note: Bikes are considered Inventory)
5. March 2: Billy Bob paid FedEx $1,849 cash to ship the bikes he bought from Biker’s Bargains.
6. March 4: Billy Bob purchased $2,751 worth of supplies from Oliver’s Office Supplies paying cash.
7. March 5: Billy Bob sold 9 bikes to Carl’s Cars for $7,950 each with credit terms of 2/10, n/30. The
total cost of the bikes was figured out to be $27,747.
8. March 5: Carl’s Cars paid DHL $1,107 cash to ship the bikes he just bought.
9. March 7: Billy Bob hires Biker Betty for promotional purposes. He estimates her salary to be
$10/hour. She will probably work 10 hours this month.
10. March 10: Billy Bob paid off the balance due from Biker’s Bargains.
11. March 11: Carl’s Cars paid his balance off for the bikes he purchased.
12. March 12: Billy Bob’s pay period ends and he now owes his employees $4,444 in salaries. These
salaries will be paid on March 17th.
13. March 14: Billy Bob purchased 17 more bikes from Biker’s Bargains. Each bike cost $3,050 and
the credit terms are 4/10 EOM, n/50.
14. March 14: Billy Bob paid UPS $2,091 cash to ship the bikes he bought from Biker’s Bargains.
15. March 15: Billy Bob sold 12 bikes to Ro
ie Knievel for $9,150 each with credit terms of 3/10,
n/30. The cost of the bikes was determined to be $37,536.
16. March 15: Billy Bob paid FedEx $1,489 to ship the bikes to Ro
ie Knievel.
17. March 16: Billy Bob bought a Bike Making Machine for $348,304 using $48,304 cash and then
o
owing the rest from the bank. The loan will be paid off over the next 10 years (1/10 of the
principal will be paid at the end of each year). The loan ca
ies an interest rate of 8.68 percent.
Interest accrued will be paid off at the end of every year. The Bike Making Machine has an
expected life of 5.5 years, salvage value of $55,000, and will be depreciated using the straight-line
method.
18. March 17: Billy Bob paid his employees the $4,444 in salaries owed.
19. March 18: Billy Bob returned 2 of the bikes he bought from Biker’s Bargains. They credited $6,100
to his account.
20. March 20: Billy Bob’s Bikes paid cash dividends of $7,777.
21. March 22: Ro
ie Knievel returned two of the bikes because parts were falling off them. The cost
of the bikes to Billy Bob was figured out to be $6,346.
22. March 24: Billy Bob purchased 6 bikes from Bikes R’ Us. Each bike cost $2,833 and the credit
terms are 1/10 EOM, n/60.
23. March 24: Billy Bob paid FedEx $738 to have the bikes shipped to him.
24. March 26: Billy Bob paid a utilities bill in the amount of $3,247.
25. March 27: Billy Bob sells 5 bikes to Biker Chick’s Chop Shop for $9,111 each with credit terms of
3/10, n/30. The cost of the bikes was determined to be $15,750.
26. March 27: Biker Chick’s Chop Shop paid FedEx $615 to ship the bikes they just bought.
27. March 29: Billy Bob paid off the balance due from Biker’s Bargains.
28. March 30: Ro
ie Knievel paid his balance off for the bikes he purchased.
B. Bob’s
Adjustments
On March 31, you notice the following:
a) You have $332 worth of supplies on hand
) You have used up one months worth of insurance
c) You need to recognize depreciation on the building
d) You need to recognize depreciation on the bike making machine
e) You need to recognize interest accumulated on the 2 bank loans
f) You have accrued salaries of $1,577
g) You need to recognize/accrue federal income taxes of 32%. Round to the nearest dollar if
needed. Hint: compute adjusted income based on all preceding information, and then
determine and record income tax expense.
The Accounting Cycle
1. Analyze business transactions
2. Journalize the transactions
3. Post to ledger accounts
4. Prepare a trial balance
5. Journalize and post adjusting entries
6. Prepare an adjusted trial balance
7. Prepare the financial statements (I/S, Stmt of RE, B/S)
8. Journalize and post closing entries
9. Prepare a post-closing trial balance