Hector Lopez, a salaried employee of a local bicycle company, quits his job and opens his own bicycle

shop,
Bigwheels Company, on January 2, 20XX. Lets take a look at some transactions of Bigwheels Company and
see how they affect the financial statements.
Initial investment by owners, $400,000 cash. They receive 4,000 shares with a par value of $1 per share.
Loan from bank, $100,000 Acquired store equipment for cash, $15,000
Acquired inventory for cash, $120,000 Acquired inventory on credit, $10,000
Acquired inventory for $10,000 cash plus $20,000 trade credit Sold unneeded equipment for $1,000 cash
Returned inventory for supplier for full credit, $800 Paid cash to creditors, $4,000
A. Sold bicycles to customers on credit, $160,000.
B. The cost to Bigwheels of the inventory sold was $100,000.
During the month, Bigwheels collects $5,000 of its accounts receivables
Paid $6,000 of store rent covering January, February, and March of 20XX at the beginning of month
Recognize $2,000 worth of rent that was a period cost for January 20XX
Recognize a depreciation expense of $100

Transactions Debit Credit

5,00,000

1,00,000
1,00,000

4,00,000

4,00,000
5,00,000

5,00,000
Cash 4,00,000

-
Paid-in-capital 4,00,000
(Capital stock issued to Lopez)
Cash 1,00,000

(100)
Notes payable 1,00,000
3,51,000
59,200
14,000

13,900
1,55,000
4,000

25,200
1,00,000
1,25,200

4,00,000
57,900
4,57,900
5,83,100

5,83,100
(Borrowed at 9% interest on a one-year note)
Store equipment 15,000
Cash 15,000
(Acquired store equipment for cash)
Inventory 1,20,000

Par and paid-in-capital

Cash 1,20,000

Liabilities and Equity

Shareholders' equity
(Acquired inventory for cash)

Total liab and SE

Accounts payable
Inventory 10,000
Balance sheet

Equipment, net

Notes payable
Less: AccDep

Total liabilities
Accounts payable 10,000
Total assets
Prepaid rent
Receivables
Equipment

(Acquired inventory on credit )

Inventory

Total SE
Assets

Inventory 30,000
Cash

Cash 10,000

RE
Accounts payable 20,000
(Acquired inventory for cash plus credit )
(2,000)
(100)
(1,00,000)

0
57,900

57,900

57,900
1,60,000

Cash 1,000
Equipment 1,000
(Sold store equipment to business neighbor)
Accounts payable 800
Inventory 800
Beginning RE
Rent expense

(Returned some inventory to supplier)

Depreciation
Net income

Net income

Closing RE

Accounts payable 4,000

Dividends
IS or PL

COGS

Cash 4,000
Sales

(Payments to suppliers)
Accounts receivables 1,60,000
Sales 1,60,000
(Sold goods of credit)
1,00,000
25,200
4,00,000

100
1,60,000

6,85,300

Cost of goods sold 1,00,000

Inventory 1,00,000
Credit

(Record cost of goods sold )

Cash 5,000
3,51,000
59,200
14,000

4,000

100

2,000
1,55,000

1,00,000

6,85,300

Accounts receivable 5,000

(Received cash from AR)
Debit

Prepaid rent 6,000

Cash 6,000
(Paid 3 months rent in advance)
Accounts payable

Rent expense 2,000

Paid-in-capital
Notes payable

Prepaid rent 2,000

Trial balance

Rent expense
Transactions

Depreciation
Prepaid rent
Receivables

(Record rent expense for the month )

Equipment
Inventory

Depreciation expense 100

COGS
Sales
Cash

Accumulated depreciation 100

Acc

( Record depreciation expense for the month)