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is planning to start a bicycle shop. He is exploring different options for financing his business, and ying to decide whether he should focus more on bicycle repairs and maintenance, selling new bicycles a balance of both activities. The following transactions and financial statements examine the financial npact of each option he is considering. Ian A: Primarily debt funded (from creditors); focus on service (repairs \& maintenance); requires more investment in equipment and higher salary expense (for more skilled workers.) Ian B: Primarily equity funded (from stockholders); focus on merchandise sales; incurs higher rent expense for nicer showroom. lan Ci Balances debt and equity funding. Balances earning revenue from service and merchandise sales, equirements: . List the annual transactions for your plan in the Horizontal Transaction Analysis table. (20 points) - Indicate the increase / (decrease) to each account involved in the transaction - Identify the type of cash flow activity for all cash transactions (OA Operating, IA Investing, FA Financing) - Record the Closing Entry for each year by zeroing out the temporary accounts and transferring the net income to retained earnings - Calculate the total in each column at the end of the each year. - Permanent account balances will carry forward from one year to the next, so year end totals will accumulate through the years. Use the Horizontal Transaction Analysis balances and the details from the transactions each year to create the following Financial Statements for each year ( 30 points) Income Statement/Statement of Stockholders' Equity / Balance Sheet / Statement of Cash Flows - 1. Issue Stock for 3,000 8. Interest Expense (4,0006%12/12) 2. Sign Note to borrow 4,000 (i) 6% 3. Purchase Equipment for 1,8006 yr, life, 4. Operating Expenses paid in cash 400 5. Revenues received in cash 3,000 6. Purchased Inventory for cash 2,500 7. Sold Imventory for 1,000 ; cog600 9. Depreciation Expense (1,800/6) 10. Dividend paid ( 5% of Common Stock) Year 2 Transactions - Partial 1. Repay 1/4 of Nete Payable 1. Repay 1/4 of Note Payable (25\% of original note each year) 2. Record interest expense 3. Record Depreciation Expense Straight Line Depe. Same amount each year 4. 5 old Merchandise for 1,100,COG640 Big Picture Project Sample - ACCT2003 2022 1. Issue Stock for 3,000 8. Interest Expense (4,0006%12/12) 4. Sign Note to borrow 4,0006% 5. Purchase Equipment for 1,8006 yr. life, no salvage 74. Operating Expenses paid in cash 400 3. Revenues received in cash 3,000 9. Depreciation Expense (1,800/6) 7. Sold inventory for 1,000; cocs600 10. Dividend paid ( 5% of Common Stock) \begin{tabular}{l|ll} \hline & 4. Sold Merchandise for 1,100, cos640 \\ \hline & Balance Sheet \\ \hline \end{tabular} \begin{tabular}{|l|r|r|} \hline Beginning Retained Earnings & 0 & 2,310 \\ \hline \hline+ Net Income & 2,460 & 20 \\ \hline Dividends & 150 & \\ \hline Ending Retained Earnings & 2,310 \\ \hline Total Stockholders Equity & 5,310 & 2,330 \\ \hline \end{tabular} 34 2-3 Expenses 2-3 Expenses 2-3 Expenses \begin{tabular}{|l|l|l|l|l|} \hline 2-1 Purchase Inventory for $3,000 cash & & 21 Purchase Inventory for $36,000 cash & 21 Purchase Inventory for $16,000cash \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 24 Dividend Payment Common Stock 5% & 24 Dividend Payment Common Stock 5% & 24 Dividend Payment Common Stock 5% \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-2 Sales \& Service Revenue \end{tabular}\begin{tabular}{l} 3-2 Sales \& Service Revenue \\ Service Revenue $51,500 \\ Sales Rev $7,000;CoG$3,500 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-3 Debt Repayment @ 1/1/yr3 & & 33 Debt Repayment @1/1/yr3 1/4 of Original Note & 33 Debt Repayment @ 1/1/yr3 1/4 of Original Note \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline \multicolumn{1}{|c|}{ Transactions Plan A } & \multicolumn{1}{c}{ Transactions Plan B } & Transactions Plan C \\ \hline 3-1 Purchase Inventory for $3,700 cash & & 31 Purchase Inventory for $40,000cash & 31 Purchase Inventory for $20,000cash \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 43 Debt Repayment@ 1/1/yr4 & & 43 Debt Repayment @ 1/1/yr4 1/4 of Original Note & 43 Debt Repayment @ 1/1/yr4 1/4 of Original Note \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-5 Dividend Payment & & 35 Dividend Payment Common Stock 10% & 3-5 Dividend Payment Common Stock 10% \\ \hline \end{tabular} \begin{tabular}{l} 4-5 Dividend Payment \\ Common Stock 10% \\ \hline \end{tabular} is planning to start a bicycle shop. He is exploring different options for financing his business, and ying to decide whether he should focus more on bicycle repairs and maintenance, selling new bicycles a balance of both activities. The following transactions and financial statements examine the financial npact of each option he is considering. Ian A: Primarily debt funded (from creditors); focus on service (repairs \& maintenance); requires more investment in equipment and higher salary expense (for more skilled workers.) Ian B: Primarily equity funded (from stockholders); focus on merchandise sales; incurs higher rent expense for nicer showroom. lan Ci Balances debt and equity funding. Balances earning revenue from service and merchandise sales, equirements: . List the annual transactions for your plan in the Horizontal Transaction Analysis table. (20 points) - Indicate the increase / (decrease) to each account involved in the transaction - Identify the type of cash flow activity for all cash transactions (OA Operating, IA Investing, FA Financing) - Record the Closing Entry for each year by zeroing out the temporary accounts and transferring the net income to retained earnings - Calculate the total in each column at the end of the each year. - Permanent account balances will carry forward from one year to the next, so year end totals will accumulate through the years. Use the Horizontal Transaction Analysis balances and the details from the transactions each year to create the following Financial Statements for each year ( 30 points) Income Statement/Statement of Stockholders' Equity / Balance Sheet / Statement of Cash Flows - 1. Issue Stock for 3,000 8. Interest Expense (4,0006%12/12) 2. Sign Note to borrow 4,000 (i) 6% 3. Purchase Equipment for 1,8006 yr, life, 4. Operating Expenses paid in cash 400 5. Revenues received in cash 3,000 6. Purchased Inventory for cash 2,500 7. Sold Imventory for 1,000 ; cog600 9. Depreciation Expense (1,800/6) 10. Dividend paid ( 5% of Common Stock) Year 2 Transactions - Partial 1. Repay 1/4 of Nete Payable 1. Repay 1/4 of Note Payable (25\% of original note each year) 2. Record interest expense 3. Record Depreciation Expense Straight Line Depe. Same amount each year 4. 5 old Merchandise for 1,100,COG640 Big Picture Project Sample - ACCT2003 2022 1. Issue Stock for 3,000 8. Interest Expense (4,0006%12/12) 4. Sign Note to borrow 4,0006% 5. Purchase Equipment for 1,8006 yr. life, no salvage 74. Operating Expenses paid in cash 400 3. Revenues received in cash 3,000 9. Depreciation Expense (1,800/6) 7. Sold inventory for 1,000; cocs600 10. Dividend paid ( 5% of Common Stock) \begin{tabular}{l|ll} \hline & 4. Sold Merchandise for 1,100, cos640 \\ \hline & Balance Sheet \\ \hline \end{tabular} \begin{tabular}{|l|r|r|} \hline Beginning Retained Earnings & 0 & 2,310 \\ \hline \hline+ Net Income & 2,460 & 20 \\ \hline Dividends & 150 & \\ \hline Ending Retained Earnings & 2,310 \\ \hline Total Stockholders Equity & 5,310 & 2,330 \\ \hline \end{tabular} 34 2-3 Expenses 2-3 Expenses 2-3 Expenses \begin{tabular}{|l|l|l|l|l|} \hline 2-1 Purchase Inventory for $3,000 cash & & 21 Purchase Inventory for $36,000 cash & 21 Purchase Inventory for $16,000cash \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 24 Dividend Payment Common Stock 5% & 24 Dividend Payment Common Stock 5% & 24 Dividend Payment Common Stock 5% \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-2 Sales \& Service Revenue \end{tabular}\begin{tabular}{l} 3-2 Sales \& Service Revenue \\ Service Revenue $51,500 \\ Sales Rev $7,000;CoG$3,500 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-3 Debt Repayment @ 1/1/yr3 & & 33 Debt Repayment @1/1/yr3 1/4 of Original Note & 33 Debt Repayment @ 1/1/yr3 1/4 of Original Note \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline \multicolumn{1}{|c|}{ Transactions Plan A } & \multicolumn{1}{c}{ Transactions Plan B } & Transactions Plan C \\ \hline 3-1 Purchase Inventory for $3,700 cash & & 31 Purchase Inventory for $40,000cash & 31 Purchase Inventory for $20,000cash \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 43 Debt Repayment@ 1/1/yr4 & & 43 Debt Repayment @ 1/1/yr4 1/4 of Original Note & 43 Debt Repayment @ 1/1/yr4 1/4 of Original Note \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline 3-5 Dividend Payment & & 35 Dividend Payment Common Stock 10% & 3-5 Dividend Payment Common Stock 10% \\ \hline \end{tabular} \begin{tabular}{l} 4-5 Dividend Payment \\ Common Stock 10% \\ \hline \end{tabular}