Best Bicycles Inc.
Accounting Cycle Case
Instructions

The objective of this accounting cycle case is to prepare and post December journal entries to Best Bicycle,
Inc.’s general ledger, and prepare a trial balance, balance sheet, and income statement as of December 31,
2015. Then you are to prepare and post the closing entries and prepare a post-closing trial balance.
You will note this Excel worksheet has various tabs at the bottom to the page. Each tab represents a separate
worksheet. To access each worksheet, click on the desired tab.
To start this project, go to the transactions tab and prepare journal entries to record each of these
transactions. Re-record each journal entry on the journal entry tab. Hint: read all of the transactions before
you begin, so you can determine whether the company uses a periodic inventory system or a perpetual
inventory system.
Next, post the journal entries to the general ledger located on the general ledger tab.

After all entries have been posted to the general ledger, prepare a trial balance on the trial balance tab. Be
sure the trial balance is in balance, that the total debits equal the total credits. Do not proceed to the next
step until the trial balance balances. Hint: If it doesn’t balance, you probably have entered something on the
wrong side, or the debits didn’t equal the credits in one or more general journal entries.
Prepare a balance sheet and income statement from the trial balance using the balance sheet and income
statement tabs, Remember that you will need to include the net income or loss from your income statement
in the retained earnings balance on the balance sheet for it to balance.
Next prepare and post closing entries to the general ledger.
The final step is to prepare a post closing trial balance. This should be done on the post closing trial balance
tab. This trial balance should also be balanced. Once you have done this and see that it balances, you have
completed the project. Congratulations.

Best Bicycles, Inc.
General Journal Entries

Date

Entry No

Description

Dr

Cr.

Best Bicycles, Inc.
General leger
CASH

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Description
Beginning balance

Description
Beginning balance

Description
Beginning balance

Description
Beginning balance

Reference
No

Transactions
Dr
Cr

ACCOUNTS RECEIVABLE
Reference
Transactions
No
Dr
Cr

PREPAID INSURANCE
Reference
Transactions
No
Dr
Cr

INVENTORY
Reference
Transactions
No
Dr
Cr

Balance
Dr
12,450.00

Balance
Dr
1,125.00

Balance
Dr
100.00

Balance
Dr
24,621.00

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Description
Beginning balance

Description
Beginning balance

Description
Beginning balance

EQUIPMENT
Reference
Transactions
No
Dr
Cr

ACCUMULATED DEPR. – EQUIPMENT
Reference
Transactions
No
Dr
Cr

ACCCOUNTS PAYABLLE
Reference
Transactions
No
Dr
Cr

Balance
Dr
5,000.00

Balance
Dr

Balance
Dr

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Description
Beginning balance

Description
Beginning balance

Description
Beginning balance

Description
Beginning balance

NOTE PAYABLE
Reference
Transactions
No
Dr
Cr

Balance
Dr

COMMON STOCK
Reference
Transactions
No
Dr
Cr

Dr

ADDITIONAL PAID IN CAPITAL
Reference
Transactions
No
Dr
Cr

Dr

RETAINED EARNINGS
Reference
Transactions
No
Dr
Cr

Balance

Balance

Balance
Dr

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Description
Beginning balance

BICYCLE SALES
Reference
Transactions
No
Dr
Cr

Description

COST OF GOODS SOLD
Reference
Transactions
No
Dr
Cr

Description

RENT EXPENSE
Reference
Transactions
No
Dr
Cr

Description

SALARIES EXPENSE
Reference
Transactions
No
Dr
Cr

Balance
Dr

Balance
Dr
97,275.00

Balance
Dr
16,500.00

Balance
Dr
11,000.00

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Date
11/30/2015

Description

Interest Expense
Reference
Transactions
No
Dr
Cr

Description

INSURANCE EXPENSE
Reference
Transactions
No
Dr
Cr

Description

DEPREICATION EXPENSE
Reference
Transactions
No
Dr
Cr

Description

DISCOUNTS EARNED
Reference
Transactions
No
Dr
Cr

Balance
Dr
950.00

Balance
Dr
1,100.00

Balance
Dr
825.00

Balance
Dr

170,946.00

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr
2,400.00

Balance
Cr
5,964.00

Balance
Cr
10,000.00

Balance
Cr
1,000.00

Balance
Cr
9,000.00

Balance
Cr
12,671.00

Balance
Cr
129,700.00

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr

Balance
Cr
211.00

170,946.00

Best Bicycles, Inc.
Adjusting Journal Entries

Date

Entry No

Description

Dr

Cr.

Best Bicycle, Inc.
Trial Balance
December 31, 2015
Dr
Cash
Accounts receivable
Prepaid insurance
Inventory
Equipment
Accumulated depr – equipment
Accounts payable
Note payable
Common Stock
Additional Paid in capital
Retained earnings
Bicycle sales
Cost of goods sold
Rent Expense
Salaries Expense
Interest Expense
Insurance expense
Depreciation expense
Discounts Earned

Cr

Best Bicycle, Inc.
Trial Balance
December 31, 2015
Dr
Cash
Accounts receivable
Prepaid insurance
Inventory
Equipment
Accumulated depr – equipment
Accounts payable
Note payable
Common Stock
Additional Paid in capital
Retained earnings
Bicycle sales
Cost of goods sold
Rent Expense
Salaries Expense
Interest Expense
Insurance expense
Depreciation expense
Discounts Earned

Cr

Best Bicycles, Inc.
Balance Sheet
December 31, 2015
Assets
Current Assets
Cash
Accounts Receivable
Prepaid Insurance
Inventory
Total current assets
Property and Equipment
Equipment
Less accumulated depreciation

LIABILITIES
Current liabilities
Accounts payable
Note payable
Total current liabilities
Stockholders’ Equity
Common stock
Additional paid in capital
Retained earnings
Total stockholders’ equity

Total Assets

Total liabilities and
stockholders’ equity

Best Bicycles, Inc.
Income Statement
For the Year Ended December 31, 2015

Bicycle Sales
Cost of goods sold
Gross profit
Operating Expenses
Rent
Salaries
Interest
Insurance
Depreciation expense
Total operating expense
Net come from operations
Other income
Discounts earned
Net Income

Best Bicycles Inc
December 2015 Transactions

Date

Description

1-Dec

Sold bicycle for $1,200 receiving $600 in cash with the
balance to be paid in 30 days. The cost of the bicycle was
$900.

4-Dec

Paid December’s rent in the amount of $1,500.

4-Dec

Paid vendors’ invoices dated 11-27-2015. The invoices
totaled $2,000 and the terms were 2/10 net 30

5-Dec

Purchased inventory in the amount of $1,800 on credit.

15-Dec

Paid wages in the amount of $500.

16-Dec

Collected accounts receivable in the amount of $1,400.

18-Dec

Cash sale of bicycles in the amount of $1850. The cost of
these bicycles was $1,400.

20-Dec

Paid December’s interest on note payable in the amount of
$50.

31-Dec

Paid wages in the amount of $500

31-Dec

Recorded December depreciation on equipment in the
amount of $75.

31-Dec

Took a physical inventory and found the cost of the
remaining unsold inventory was $22,981.

31-Dec

Made a $1,000 principal payment on the note payable.