Maibrit’s Bike’s began operations in April 2017 and had the following

Maibrit’s Bike’s began operations in April 2017 and had the following transactions.

a) Owner invested $120,000 cash and a truck worth $36,000 in exchange for stock.

b) Paid $84,000 cash for 6 months’ rent.

c) Purchased $300,000 of bicycle inventory on credit.

d) Sold bicycles for cash of $507,000. The cost of the bikes sold was $180,000.

e) Sold and invoiced bicycles to a client for $95,400. The cost of the bikes sold was $48,000.

f) Paid $90,000 cash for an advertising campaign in connection with Tour de France. The campaign will run over the next two of months.  

g) Paid $24,000 in cash for supplies to have on hand for bike repairs.

h) Collected $60,000 from accounts receivable.

i) Paid for bikes purchased on credit in Transaction c above.

j) Paid cash dividends of $3,000.

k) Received $6,000 cash from a customer as a deposit for a custom bicycle to be built.

Required:  Record each transaction a) through k) in the financial statements effects template, below.

I need to know how each of these transactions will effect the balance sheet and income statement.

Balance sheet: Is it a cash asset, non-cash asset, liability, contributed capital, or earned capital? Does it effect the balance sheet as a positive or negative transaction?

Income statement: Is the transaction considered revenue, expenses, or net income? Does it effect the income statement as a positive or negative transaction?

At the end of April, the following information is available:

i.   At the end of April, $19,200 supplies remained on hand.

ii.  Rent paid in Transaction b is for a lease that began on April 1.

iii. At the end of April, one-third of the advertising campaign in Transaction f was completed.

iv.  The truck is expected to be used for five years (60 months).

v.  The custom bicycle in Transaction k was built and delivered to the customer on April 30.

 Balance sheet: Is it a cash asset, non-cash asset, liability, contributed capital, or earned capital? Does it effect the balance sheet as a positive or negative transaction?

Income statement: Is the transaction considered revenue, expenses, or net income? Does it effect the income statement as a positive or negative transaction?

Here’s the SOLUTION

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