Question

January 1: The owners hire Lisa Marton to manage the store, paying her a salary of $3,000 a month. Lisa is paid on the 1st of every month, starting on February 1 (which would represent her January pay). They have one other employee who they pay $2,000 a month, also on the 1st of the following month.

January 14: Paid utilities for 4th quarter of 2017, $875.

February 1: Installed new light fixtures and display cases in the leased store. CWB paid $1,800 for the fixtures, $230 for shipping to the store, and $800 to an electrician to install. The landlord gave CWB permission to remove and dispose of the old fixtures. CWB sold the old fixtures for $110. CWB anticipates being in the store for at least 3 years. CWB cannot take the light fixtures with them if they relocate as they will revert to the lessor. CWB can take the display cases, which cost $5,400, if they move. Both the display cases and light-fixtures have a six-year useful life.

March 1: CWB invests in a $2,000 3-month treasury bill paying interest of 2.0%

March 12: One of the standard bikes sold was returned by the customer. The bike sold for $225. CWB paid $80 for it. CWB provided a full refund. CWB’s policy is to provide a customer with a full refund within 30 day of purchase as long as the bike is returned in good condition. While the bike is in good working condition, CWB does not anticipate being able to sell the bike as new – rather it anticipates marking it down and selling it for $150.

March 24: A customer puts down a deposit of $400 on a high-end racing bike that sells for $2,800. CWB ordered the bike from the manufacturer. The manufacturer promises CWB will have the bike at the store on April 3.

Here is other information on other activity and recurring transactions that occurred during the period.

-CWB rents its premises for $1,600 per month, with rent due on the 15^st of the prior month.

-CWB has a business insurance policy, which it purchased for $5,280 on May 1, 2017. The policy runs until April 30, 2018.

CWB has a $15,000 loan outstanding at an interest rate of 10% a year, with annual interest due on January 1. The loan matures on January 1, 2021.

CWB offers bike tune-ups for $80 each. CWB’s employees are experts in adjusting brakes. Below is the number of tune-ups performed in each month. All customers pay in cash. (For recording the transactions, you can assume all tune-ups are done the last day of the month).

Month	Number of Tune-Ups
January	12
February	35
March	30

CWB has the following purchases and sales of racing bikes (there were no racing bikes in beginning inventory)*:

Date	Transaction	Quantity	Cost per Bike	Sales Price per Bike
January 15	Purchase	10	$150
January 25	Purchase	15	$155
February 12	Sale	10		$635
February 13	Purchase	14	$170
March 1	Sale	20		$640
March 20	Purchase	101/1	$180

*All purchasers of racing bikes are given two years of complimentary tune-ups. No tune-ups on bike’s sold were performed in the current quarter.

**All purchases were made using cash except the March 20th purchase for which CWB obtained three-months credit from the bike supplier.

CWB has 25 standard bikes in beginning inventory. The bikes were purchased at a price of $101 each. The following purchases and sales of standard bikes occurred during the quarter:

Date	Transaction	Quantity	Cost per Bike
January 31	Sale	10
February 17	Purchase	19	$111
February 19	Sale	25
March 2	Purchase	22	$120

+All purchasers of standard bikes are given the option of buying a bike for $285, or a bike with two years of tune-ups for $355. Three of the bikes sold on February 19^th were sold with the tune-up option. No tune-ups on bike’s sold were performed in the current quarter.

CWB has 12 children’s bikes in beginning inventory. The bikes were purchased at a price of $98 each. The following purchases and sales of children’s bikes occurred during the quarter^:

Date	Transaction	Quantity	Cost per Bike	Sales Price per Bike
January 3	Purchase	30	$95
January 25	Sale	5		$175
February 12	Sale	10		$180
February 13	Purchase	15	$99
March 11	Sale	25		$175

^Tune-ups are not usually performed on children’s bikes

CWB owns various tools and equipment which it pools for purpose of calculating depreciation. In the past it has used straight-line depreciation over a ten-year period with no scrap or salvage value for these assets. However, with technology changing rapidly, CWB questions whether it will have to replace the equipment earlier.

- On April 7 received Utilities bill for the first quarter of 2018 - $945.

- The tax rate is 20%.

Cherry & White Bike Company

Post-Closing Trial Balance

12/31/2017

Account Title	Debit	Credit
Cash	$33,311
Store supplies	460
Prepaid rent	1,600
Prepaid insurance	1,560
Inventory – standard bikes (25 bikes)	2,525
Inventory – children’s bikes (12 bikes)	1,176
Equipment	14,500
Accumulated depreciation - equipment		$4,350
Accounts payable		8,724
Utilities payable		875
Salaries payable		2,000
Interest payable		1,500
Loans payable		15,000
Capital stock		20,000
Retained Earnings		7,033
Totals	$55,132	$55,132

NEED Journal Entries, Income Statement, Stockholders' Equity Statement, and Balance Sheet and all related notes such as significant accounting policies, cash and cash equivalents, revenue recognition, inventory, equipment, and any other notes.

Answer 1

	Cherry & White Bike Company
	Journal Entries
Date	Account Name	Dr/Cr	Amount Dr	Amount Cr
3-Jan-18	Children bike Purchases A/c	Dr	2850
	To Cash A/c	Cr		2850
	(Being purchase of children bikes -30*95)
14-Jan-18	O/s Uitlites A/c	Dr	875
	To Cash A/c	Cr		875
	(Being Paid utilities for 4th quarter of 2017, $875)
15-Jan-18	Rent A/c	Dr	1600
	To Cash A/c	Cr		1600
	(Being rent for Feb paid)
15-Jan-18	Racing bike Purchases A/c	Dr	1500
	To Cash A/c	Cr		1500
	(Being purchase of Racing bike- 10*150)
25-Jan-18	Racing bike Purchases A/c	Dr	2325
	To Cash A/c	Cr		2325
	(Being purchase of Racing bike- 15*155)
25-Jan-18	Cash A/c	Dr	875
	To Children bikes Sales A/c	Cr		875
	(Being sold Children bikes-5*175)
31-Jan-18	Cash A/c	Dr	960
	To Bike Tuneup A/c	Cr		960
	(Being Bike tune up revenue received for Jan -12*80)
31-01-2018	Cash A/c	Dr	2850
	To Sale of standard bike A/c	Cr		2850
	(being sold 10 standard bikes -10* 285)
1-Feb-18	Fixtures A/c	Dr	1800
	Fixtures A/c	Dr	230
	Fixtures A/c	Dr	800
	To Cash A/c	Cr		2830
	(Being paid $1,800 for the fixtures, $230 for shipping to the store, and $800 to an electrician to install)
1-Feb-18	Cash A/c	Dr	110
	To Landlord A/c	Cr		110
	(Being CWB sold the old fixtures for $110)
1-Feb-18	Salary A/c	Dr	5,000.00
	To Cash A/c	Cr		5,000.00
	(Being Salary paid to Lisa M $ 3000 & Others $ 2000 for Jan)
12-Feb-18	Cash A/c	Dr	6,350.00
	To Sale of Racing Bike A/c	Cr		6,350.00
	(Being sols racing bikes -10*635)
12-Feb-18	Cash A/c	Dr	1800
	To Children bikes Sales A/c	Cr		1800
	(Being sold Children bikes-10*180)
13-Feb-18	Children bike Purchases A/c	Dr	1485
	To Cash A/c	Cr		1485
	(Being purchase of children bikes -15*99)
13-Feb-18	Racing bike Purchases A/c	Dr	2380
	To Cash A/c	Cr		2380
	(Being purchase of Racing bike- 14*170)
15-Feb-18	Rent A/c	Dr	1600
	To Cash A/c	Cr		1600
	(Being rent for Mar paid)
17-02-2018	Standard bike purchase A/c	Dr	2109
	To Cash A/c	Cr		2109
	(being bought 19 standrad bikes-19*111)
19-02-2018	Cash A/c	Dr	8875
	To Sale of standard bike A/c	Cr		8875
	(being sold 25 standard bikes -25* 355)
28-Feb-18	Cash A/c	Dr	2800
	To Bike Tuneup A/c	Cr		2800
	(Being Bike tune up revenue received for Feb -35*80)
1-Mar-18	Cash A/c	Dr	12,800.00
	To Sale of Racing Bike A/c	Cr		12,800.00
	(Being sols racing bikes -20*640)
1-Mar-18	Salary A/c	Dr	5,000.00
	To Cash A/c	Cr		5,000.00
	(Being Salary paid to Lisa M $ 3000 & Others $ 2000 for Feb)
1-Mar-18	Treasury bills A/c	Dr	2,000.00
	To Cash A/c	Cr		2,000.00
	(Being CWB invests in a $2,000 3-month treasury bill paying interest of 2.0%)
2-Mar-18	Standard bike purchase A/c	Dr	2640
	To Cash A/c	Cr		2640
	(being bought 22 standrad bikes-22*120)
11-Mar-18	Cash A/c	Dr	4375
	To Children bikes Sales A/c	Cr		4375
	(Being sold Children bikes-25*175)
12-Mar-18	Sales Returns A/c	Dr	225.00
	To Cash A/c	Cr		225.00
	(Being sales returns)
12-Mar-18	Cash A/c	Dr	150.00
	To Sales A/c	Cr		150.00
	(being sold the refurbised bike)
15-Mar-18	Rent A/c	Dr	1600
	To Cash A/c	Cr		1600
	(Being rent for Apr paid)
20-Mar-18	Racing bike Purchases A/c	Dr	18180
	To supplier A/c	Cr		18180
	(Being purchase of Racing bike- 101*180)
24-Mar-18	Cash A/c	Dr	400.00
	To Customer Deposits A/c	Cr		400.00
	(Being customer puts down a deposit of $400 on a high-end racing bike)
31-Mar-18	Cash A/c	Dr	2400
	To Bike Tuneup A/c	Cr		2400
	(Being Bike tune up revenue received for Mar -30*80)
31-Mar-18	Utilities A/c	Dr	945
	To Utilities Payable A/c	Cr		945
	(Being 1st quarter utilities payable)
1-Apr-18	Salary A/c	Dr	5,000.00
	To Cash A/c	Cr		5,000.00
	(Being Salary paid to Lisa M $ 3000 & Others $ 2000 for Mar)
Stanard Bike Purchase Sale Date No Rate Amount Date No Rate Amount B/f 25 101 2525 31-01-2018 10 285 2850 17-02-2018 19 111 2109 19-02-2018 25 355 8875 02-03-2018 22 120 2640 66 7274 35 11725 C/f 31 3639 Racing Bike Purchase Sale Date No Rate Amount Date No Rate Amount 15-01-2018 10 150 1500 12-02-2018 10 635 6350 25-01-2018 15 155 2325 01-03-2018 20 640 12800 13-02-2018 14 170 2380 20-03-2018 101 180 18180 140 24385 30 19150 C/f 110 19710 Children bike Purchase Sale Date No Rate Amount Date No Rate Amount B/f 12 98 1176 25-01-2018 5 175 875 03-01-2018 30 95 2850 12-02-2018 10 180 1800 13-02-2018 15 99 1485 11-03-2018 25 175 4375 57 5511 40 7050 C/f 17 7185
Income Statement Opening Stock Sales Stanard Bikes 2525 Stanard Bikes 11725 Children Bikes 1176 3701 Children Bikes 7050 Racing Bike Racing Bike 19150 37925 Purchases Closing Stock Stanard Bikes 4749 Stanard Bikes 3639 Children Bikes 4335 Children Bikes 7185 Racing Bike 24385 33469 Racing Bike 19710 30534 Loss on sales return 5 Rent 4800 Tune up revenue 6160 Salaries 15000 Utilites 945 Depreciation 2828.333 Interest 375 Profit 13500.67 74619 74619 Balance Sheet 31-12-2017 31-03-2018 31-12-2017 31-03-2018 Liabilities Amount Assets Amount Capital stock 20000 20000 Equipment 18850 Retained Earnings 7033 20533.667 Less: Acc Dep -4350 14500 11672 Fixtures 2830 Accounts payable 8724 22474 Utilities payable 875 945 Inventory Salaries payable 2000 5000 Stanard Bikes-31 2525 3639 Interest payable 1500 1800 Children Bikes-17 1176 7185 Loans payable 15000 15000 Racing Bike-110 19710 Landlord 110 Treasury bills 2000 Cutomer Deposits 400 Stores Supplies 460 460 Prepaid Insurance 1560 130 Prepaid Rent 1600 1600 Cash 33311 37037 55132          86,263 55132 86263