Problem 5 (30 Points) (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 cabove. 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. 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?
