A-310

Fall 2018

Quiz 1

The following information relates to Vida Fitness Club which wasstarted by Mark Cooper and includes one fitness club that sellsathletic apparel and provides personal training. On July 1, 2018,Mark decided to incorporate and open his club. At the time ofincorporation he had one investor who was eager to provide capital.The company uses the accrual method of accounting and made thefollowing transactions during the months of July and August.

Transactions for July:

DATE	TRANSACTION
1	Mark donated athletic equipment with a value of $150,000 and$250,000 cash in exchange for an equity stake. The sole investor purchased 100,000 shares of $10.00 par valuestock in exchange for an investment of $1,060,000.
1	The company paid for a year lease on a building in advance. Themonthly rent for this building is $15,250.
1	Purchased additional athletic equipment from Jillian Michaelsfor $130,700. Mark put down $30,700 and signed a 10 month NotePayable with annual interest of 10% for the remainder. The notecalls for monthly payments of $10,000. The first payment is dueAugust 1. Interest is paid quarterly.
1	Purchased athletic apparel from Adidas on credit for$75,200.
1	Paid the premium on two-year insurance policy, $26,750.
9	Had a “great” grand opening and sold $25,000 worth of hisinventory for $100,000. Of this $100,000 worth of sales, $75,000was cash and $25,000 was charged by customers to an in store creditcard. In addition, Mark sold 25 annual memberships; customers pay$2,500 annually for unlimited athletic classes. All of thememberships were paid on the spot with cash.
12	Customers who opened in store credit made payments of $ 5,750 ontheir accounts.
20	Paid utility bills, $25,800.
25	Purchased office supplies on credit from Staples, $22,250.
25	Paid employees for the month, $10,500.

·         Prepare thejournal entries for the month of July and then prepare theadjusting entries for the month of July given the followingadditional information:

a)      Onemonth’s insurance has expired.

b)      Onemonth’s rent has expired.

c)      Theremaining inventory of office supplies is $2,250.

d)     Interesthas accrued on the note payable.

e)      Onemonth’s worth of memberships have elapsed.

Transactions for August:

DATE	TRANSACTION
1	More athletic apparel was sold for $66,000, which had a cost toMark of $26,000. All of these sales were cash sales.
1	Sold 25 more annual memberships at $2,500 each.
1	Made monthly payment to Jillian Michaels, $10,000.
19	Paid utility bills, $21,000.
20	Paid Adidas on account $15, 800.
28	Purchased additional office supplies on credit from Staples$1,500.
28	Paid employees for the month, $9,500.

·         Prepare thejournal entries for the month of August and then prepare theadjusting entries for the month of August given the followingadditional information:

f)       One month’s insurance hasexpired.

g)      Onemonth’s rent has expired.

h)      Theremaining inventory of office supplies is $150.

i)        Interest has accruedon the note payable.

j)        Another month’s worthof memberships have elapsed.

k)      Thetax rate for the company is 35% and income taxes will be paid nextmonth. This amount is due if there is income, otherwise income taxis zero.

·         Prepare anadjusted trial balance after entries for August 31, 2018.

·         Prepare financialstatements for the 2 months ending August 31,2018. (Income Statement, Balance Sheet, Statement of RetainedEarnings)