What are the detailed accounting transactions and procedures involved in Pedal Pushers' business operations in November and December 2020?
Detailed Accounting Transactions and Procedures
November 2020:
In November 2020, Pedal Pushers had several significant transactions that impacted their financial records. These transactions include contributions of capital, leasing of retail space, purchasing insurance, acquiring assets, making inventory purchases, and receiving payments from customers.
1. Capital Contributions:
- Chelsea contributes $25,000 cash, and Clint contributes $6,000 in cash along with industrial shelving and other equipment worth $19,000.
- 1,000 shares of $1 par Common Stock are issued to the partners equally.
2. Rental and Insurance Expenses:
- The company signs a lease for retail space and pays $6,600 for the first 6 months' rent.
- A 6-month insurance policy is purchased for $1,500 to insure the business.
3. Asset Acquisition:
- A Point-of-Sale system is bought for $4,500 with payment terms Net 45 FOB Shipping Point, with an estimated 10-year life and no residual value.
4. Inventory Purchases:
- Office supplies are bought for $590.
- Bikes and bike helmets are purchased on account from different suppliers.
5. Other Transactions:
- Various cash transactions with customers took place, along with borrowing money from the bank and paying off bills.
6. Adjusting Entries:
- At the end of November, adjusting entries were made to account for expenses and inventory changes.
December 2020:
December saw additional sales to customers, payments of bills and invoices, and the closure of business for the year-end holiday.
1. Sales and Receivables:
- Sales were made to cash customers and accounts receivable transactions occurred with specific terms.
2. Expenses and Bill Payments:
- Bills for purchases were paid, and utility bills were settled.
3. Dividends and Year-End Closure:
- Partners decided to take dividends, and the business closed for a holiday break.
4. Adjusting Entries:
- Additional adjusting entries were made at the end of December to reflect changes in expenses and remaining office supplies.
Overall, the transactions at Pedal Pushers were recorded as journal entries, posted to ledgers, and compiled into trial balances, both unadjusted and adjusted. Financial statements such as the Income Statement, Statement of Retained Earnings, Balance Sheet, and Cash Flow Statement were prepared based on the adjusted trial balance.