Intermediate Accounting Accounting Cycle Project Cherry & White Bike Company The Cherry & White Bike Company is a small closely-held company with two owners. Its two owners, Charlotte and George, have decided to expand the business. You are CWB’s accountant. Your responsibilities include maintaining all accounting records and preparing annual financial statements. Cherry & White Bikes’ started on January 2, 2017. CWB’s year end is December 31st. CWB wants to take out a loan to expand its business in the coming year. The banks and lending institutions require a set of financial statements prepared under U.S. GAAP to evaluate CWB’s credit worthiness. You must prepare a complete set of financial statements including the notes to the financial statements for the period ending December 31, 2017. You need to choose CWB’s accounting policies and methods for areas including inventory cost flow, revenue recognition, and depreciation. You will need to consider the proper classification of assets and liabilities as current and non-current on the balance sheet. To obtain a loan with the lowest interest rate available, CWB company needs to show high profitability, and strong liquidity and solvency. You realize the common financial statement analysis ratios for profitability, solvency and liquidity will depend on the accounting methods you choose. So, you carefully analyze the accounting choices in light of common financial statement ratios. The owners also have expressed to you that they need to know their inventory and cost of goods sold to manage purchases and pricing. So, you are highly considering using a perpetual inventory system. You have a trial balance and must add the additional transactions and activities identified below. You can add accounts to the trial balance, as needed. Cherry & White Bikes had the following additional transactions June 1: The owners hire Lisa Marton to manage the store, paying her a salary of $3,000 a month. Lisa is paid on the 1st of every month, starting on July 1. July 1: Installed new light fixtures and display cases in the leased store. CWB paid $1,800 for the fixtures, $230 for shipping to the store, and $800 to an electrician to install. The landlord gave CWB permission to remove and dispose of the old fixtures. CWB sold the old fixtures for $110. CWB anticipates being in the store for at least 3 years. CWB cannot take the light fixtures with them if they relocate as they will revert to the lessor. CWB can take the display cases, which cost $6,400, if they move. Both the display cases and light-fixtures have a six-year useful life. August 1: CWB invests $2,000 in an 18-month certificate of deposit paying interest of 1.5%. November 1: CWB invests in a $1,000 3-month treasury bill paying interest of 1.0% December 12: One of the standard bikes sold was returned by the customer. The bike sold for $250. CWB paid $80 for it. CWB provided a full refund. CWB’s policy is to provide.

1. Intermediate Accounting
Accounting Cycle Project
Cherry & White Bike Company
The Cherry & White Bike Company is a small closely-held
company with two owners. Its two owners, Charlotte and
George, have decided to expand the business. You are CWB’s
accountant. Your responsibilities include maintaining all
accounting records and preparing annual financial statements.
Cherry & White Bikes’ started on January 2, 2017. CWB’s year
end is December 31st.
CWB wants to take out a loan to expand its business in the
coming year. The banks and lending institutions require a set of
financial statements prepared under U.S. GAAP to evaluate
CWB’s credit worthiness.
You must prepare a complete set of financial statements
including the notes to the financial statements for the period
ending December 31, 2017. You need to choose CWB’s
accounting policies and methods for areas including inventory
cost flow, revenue recognition, and depreciation. You will need
to consider the proper classification of assets and liabilities as
current and non-current on the balance sheet.
To obtain a loan with the lowest interest rate available, CWB
company needs to show high profitability, and strong liquidity
and solvency. You realize the common financial statement
analysis ratios for profitability, solvency and liquidity will
depend on the accounting methods you choose. So, you
carefully analyze the accounting choices in light of common
financial statement ratios.

2. The owners also have expressed to you that they need to know
their inventory and cost of goods sold to manage purchases and
pricing. So, you are highly considering using a perpetual
inventory system.
You have a trial balance and must add the additional
transactions and activities identified below. You can add
accounts to the trial balance, as needed. Cherry & White Bikes
had the following additional transactions
June 1: The owners hire Lisa Marton to manage the store,
paying her a salary of $3,000 a month. Lisa is paid on the 1st of
every month, starting on July 1.
July 1: Installed new light fixtures and display cases in the
leased store. CWB paid $1,800 for the fixtures, $230 for
shipping to the store, and $800 to an electrician to install. The
landlord gave CWB permission to remove and dispose of the old
fixtures. CWB sold the old fixtures for $110. CWB anticipates
being in the store for at least 3 years. CWB cannot take the
light fixtures with them if they relocate as they will revert to
the lessor.
CWB can take the display cases, which cost $6,400, if they
move.
Both the display cases and light-fixtures have a six-year useful
life.
August 1: CWB invests $2,000 in an 18-month certificate of
deposit paying interest of 1.5%.
November 1: CWB invests in a $1,000 3-month treasury bill
paying interest of 1.0%

3. December 12: One of the standard bikes sold was returned by
the customer. The bike sold for $250. CWB paid $80 for it.
CWB provided a full refund. CWB’s policy is to provide a
customer with a full refund within 30 day of purchase as long as
the bike is returned in good condition.
December 24: A customer puts down a deposit of $400 on a
high-end racing bike that sells for $2,800. CWB ordered the
bike from the manufacturer. The manufacturer promises CWB
will have the bike at the store on January 3.
December 30: Declared and paid dividends of $500.
Here is other information on activity that occurred during the
period.
CWB offers bike tune-ups for $80 each. CWB’s employees are
experts in adjusting brakes. Below is the number of tune-ups
performed in each month. All customers pay in cash. (For
recording the transacaitons, you can assume all tune-ups are
done the last day of the month).
Month
Number of
Tune-Ups
April
12
May
35
June
23
August
11
September
20

4. October
2
December
4
CWB has the following purchases and sales of racing bikes:
Date
Transaction
Quantity
Cost per Bike
Sales Price per Bike
March 15
Purchase
10
$150
March 25
Purchase
15
$155
April 12
Sale
10
$535
April 13
Purchase
14
$170
May 1
Sale
15

5. $540
August 20
Purchase
10
$180
September 2
Purchase
12
$190
October 16
Sale
15
$550
October 21
Purchase
14
$200
November 1
Sale
9
$550
December 15
Sale
11
$560
All purchases were made using cash except the October 21st
purchase for which CWB obtained three-months credit from the
bike supplier.

6. The tax rate is 30%.
Chart of Accounts
Group
Account #
Account Title
100: Assets
101
Cash
102
Accounts receivable
103
Store supplies
104
Prepaid rent
105
Prepaid insurance
106
Prepaid advertising
110
Inventory – standard bikes
111
Inventory – racing bikes
112
Inventory – children’s bikes

7. 115
Inventory – bike supplies
120
Equipment
122
Accumulated depreciation - equipment
200: Liabilities
201
Accounts payable
205
Utilities payable
210
Unearned sales revenue
215
Unearned service revenue
220
Salaries payable
225
Taxes payable
230
Interest payable
240
Loans payable
300: Equity
301
Capital stock

8. 310
Retained earnings
320
Dividends declared
400: Revenues
401
Sales revenue
405
Sales returns
410
Service revenue
500: Expenses
500
Cost of goods sold
505
Cost of bike supplies
511
Salaries expense
512
Utilities expense
513
Selling expense
514
Administrative expense
515
Rent expense

9. 516
Insurance expense
517
Store supplies expense
518
Advertising expense
520
Depreciation expense
530
Interest expense
540
Tax expense
600: Other
601
Income summary
Cherry & White Bike COmpany
Trial Balance
Account Title
Debit
Credit
Cash
$27,311
Accounts receivable
0
Store supplies
460

10. Prepaid rent
7,600
Prepaid insurance
1,560
Prepaid advertising
0
Inventory – standard bikes
2,535
Inventory – racing bikes
0
Inventory – children’s bikes
1,243
Inventory – bike supplies
0
Equipment
26,825
Accumulated depreciation - equipment
Accounts payable
$8,724
Utilities payable
875
Unearned sales revenue
0

11. Unearned service revenue
0
Salaries payable
2,300
Taxes payable
0
Interest payable
1,500
Loans payable
15,000
Capital stock
23,000
Retained earnings
Dividends declared
Sales revenue
47,826
Service revenue
Cost of goods sold
15,300
Cost of bike supplies

12. Salaries expense
6,800
Utilities expense
2,600
Selling expense
0
Administrative expense
0
Rent expense
3,225
Insurance expense
800
Store supplies expense
466
Advertising expense
1,000
Depreciation expense
Interest expense
1500
Tax expense
Income summary

13. Totals
$99,225
$99,225
General Journal
Date
Account Titles
Debit
Credit

17. Date
Account Titles
Debit
Credit

22. Cherry & White Bike Company
Statement of Income
For the period ended December 31, 2017

23. Net Income Before Tax

24. Tax Expense
Net Income
Cherry & White Bike Company
Statement of Changes in Stockholders’ Equity
For the year ended December 31, 2017
Capital Stock
Retained Earnings
Total Equity
Balance, Beginning

25. Balance, December 31
Cherry & White Bike Company
Balance Sheet
As of December 31, 2017
ASSETS:

26. TOTAL ASSETS
LIABILITIES AND EQUITY:
Total liabilities

27. Equity:
Total Equity
TOTAL LIABILITIES AND EQUITY
Intermediate Accounting
Accounting Cycle Project
Instructions
A. Submit the completed project on Blackboard by Monday,
December 11, 2017.
B. The submitted project is required to be typed on Word or
Excel.
C. This project is an individual assignment. This project is
worth 9% of your grade.
D. In this project, you have three main deliverables:

28. 1. Financial statements including
a. income statement
b. balance sheet
c. statement of changes in stockholders’ equity
d. all related notes. In the notes to the financial statement
include notes on: significant accounting policies, revenue
recognition, inventory, equipment, and any other notes you
deem necessary.
You do not need to prepare a statement of cash flows
2. A memo to the owners of Cherry & White Bike Company
explaining and justifying the following accounting choices:
a. Accounting for inventory: inventory cost flow methods.
i. Determine possible alternatives and select a cost flow method
for accounting for the racing bike inventory.
ii. Explain why you select the alternative that you use in the
financial statements.
iii. Present an analysis of the alternatives.
iv. Show and discuss financial statements effects of the
alternative methods and estimates such as change in net income,
assets, or liabilities.
v. Examine the effects of the alternatives on the relevant
common financial statement ratios of profitability, liquidity,
and solvency.
Assume that C&W also used the method you selected or their
standard bikes and children’s bikes.
b. Accounting for equipment: purchase price and subsequent
measurement.
i. Determine possible alternatives.
ii. Explain why you select the alternative that you use in the
financial statements.
iii. Present an analysis of the alternatives.
iv. Show and discuss financial statements effects of the

29. alternative methods and estimates such as change in net income,
assets, or liabilities.
v. Examine the effects of the alternatives on the relevant
common financial statement ratios of profitability, liquidity,
and solvency.
You may consider looking at the Accounting Standards
Codification (ASC) for guidance on accounting and alternatives.
3. Prepare the journal entries for all transactions in the general
journal.
Intermediate Accounting
Accounting Cycle Project
Grading Rubric
Requirements
Points
1 - Limited
2 - Developing
3 - Proficient
4 - Exemplary
1. Financial statements including
30
a. income statement
8
Income statement is not complete, inaccurate, or not properly
formatted multi-step income statement.
Income statement presentation is lacking in being sufficiently

30. complete, or accurate, or properly formatted as multi-step
income statement.
Income statement presentation is adequate as it is mostly
complete, and accurate, and properly formatted as multi-step
income statement.
Income statement presentation is complete, accurate, and
properly formatted multi-step income statement.
b. balance sheet
8
Balance sheet is not complete, inaccurate, or not properly
formatted as a classified balance sheet.
Balance sheet presentation is lacking in being sufficiently
complete, or accurate, or properly formatted as a classified
balance sheet.
Balance sheet presentation is adequate as it is mostly complete,
and accurate, and properly formatted as a classified balance
sheet.
Balance sheet presentation is complete, accurate, and properly
formatted a classified balance sheet.
c. statement of changes in stockholders’ equity
4
Statement is not complete, inaccurate, or not properly formatted
multi-step statement.
Statement presentation is lacking in being sufficiently complete,
or accurate, or properly formatted as multi-step statement.
Statement presentation is adequate as it is mostly complete, and
accurate, and properly formatted as multi-step statement.
Statement presentation is complete, accurate, and properly
formatted multi-step statement.
d. all related notes. In the notes to the financial statement
include notes on: significant accounting policies, revenue
recognition, inventory, equipment, and any other notes you
deem necessary.
10
Notes are not complete, inaccurate or not well written.
Notes are not lacking in being sufficiently complete, accurate or

31. well written.
Notes are adequate in being sufficiently complete, accurate and
well written.
Notes are complete, accurate and well written.
Requirements
Points
1 - Limited
2 - Developing
3 - Proficient
4 - Exemplary
2. A memo to the owners of Cherry & White Bike Company
explaining and justifying the following accounting choices:
a. Accounting for inventory: inventory cost flow methods.
25
i. Determine possible alternatives and select a cost flow method
for accounting for the racing bike inventory.
5
Proposes an alternative that is difficult to evaluate because it is
vague or only indirectly addresses the problem statement.
Proposes one alternative that is “off the shelf” rather than
individually designed to address the specific contextual factors
of the problem.
Proposes one or more alternatives that indicates comprehension
of the problem. Alternatives are sensitive to contextual factors
of the case.
Proposes one or more alternatives that indicates a deep

32. comprehension of the problem. Alternatives are sensitive to
contextual factors of the case.
ii. Explain why you select the alternative that you use in the
financial statements.
iii. Present an analysis of the alternatives.
iv. Show and discuss financial statements effects of the
alternative methods and estimates such as change in net income,
assets, or liabilities.
v. Examine the effects of the alternatives on the relevant
common financial statement ratios of profitability, liquidity,
and solvency.
2
8
5
5
Evaluation of alternatives superficial (for example, contains
cursory, surface level explanation) and fails to include the
following: considers history of problem, reviews logic/
reasoning, examines feasibility of alternative, and weighs
impacts of alternative.
Evaluation of alternatives is brief (for example, explanation
lacks depth) and includes some of the following: considers
history of problem, reviews logic/ reasoning, examines
feasibility of alternative, and weighs impacts of alternative.
Evaluation of alternatives is adequate (for
example, contains thorough explanation)
and includes most of the the following: considers history

33. of problem, reviews logic/ reasoning,
examines feasibility of alternative, and weighs
impacts of alternative.
Evaluation of alternatives is deep and elegant (for example,
contains thorough and insightful explanation) and includes,
deeply and thoroughly, all of the following: considers history of
logic/ reasoning, examines feasibility of problem, reviews
alternative, and weighs impacts of alternative.
b. Accounting for equipment: purchase price and subsequent
measurement.
25
i. Determine possible alternatives.
5
Proposes an alternative that is difficult to evaluate because it is
vague or only indirectly addresses the problem statement.
Proposes one alternative that is “off the shelf” rather than
individually designed to address the specific contextual factors
of the problem.
Proposes one or more alternatives that indicates comprehension
of the problem. Alternatives are sensitive to contextual factors
of the case.
Proposes one or more alternatives that indicates a deep
comprehension of the problem. Alternatives are sensitive to
contextual factors of the case.
ii. Explain why you select the alternative that you use in the
financial statements.
iii. Present an analysis of the alternatives.
iv. Show and discuss financial statements effects of the
alternative methods and estimates such as change in net income,
assets, or liabilities.
v. Examine the effects of the alternatives on the relevant
common financial statement ratios of profitability, liquidity,

34. and solvency.
2
8
5
5
Evaluation of alternatives superficial (for example, contains
cursory, surface level explanation) and fails to include the
following: considers history of problem, reviews logic/
reasoning, examines feasibility of alternative, and weighs
impacts of alternative.
Evaluation of alternatives is brief (for example, explanation
lacks depth) and includes some of the following: considers
history of problem, reviews logic/ reasoning, examines
feasibility of alternative, and weighs impacts of alternative.
Evaluation of alternatives is adequate (for
example, contains thorough explanation)
and includes most of the the following: considers history
of problem, reviews logic/ reasoning,
examines feasibility of alternative, and weighs
impacts of alternative.
Evaluation of alternatives is deep and elegant (for example,
contains thorough and insightful explanation) and includes,
deeply and thoroughly, all of the following: considers history of
logic/ reasoning, examines feasibility of problem, reviews
alternative, and weighs impacts of alternative.
Requirements
Points

35. 1 - Limited
2 - Developing
3 - Proficient
4 - Exemplary
3. Prepare the journal entries for all transactions in the general
journal.
10
Writing and Communication – See Fox BBA Rubric
10
FOX BBA: Written Communication Rubric – Adapted for
Intermediate Accounting
Written Communication Traits
1 - Limited
2 - Developing
3 - Proficient
4 - Exemplary
Language
Uses language (word choice, vocabulary) that generally conveys
meaning with several errors. Jargon used somewhat
appropriately.

36. Uses language (word choice, vocabulary) that mostly conveys
meaning with some errors. Jargon used appropriately
Uses language (word choice, vocabulary) that effectively
conveys meaning with few errors. Jargon used appropriately
Uses language (word choice, vocabulary) that skillfully and
clearly conveys meaning with no errors. Jargon used
strategically and appropriately.
Grammar/
Spelling/
Punctuation
Occasional grammatical, spelling or punctuation errors, but
does not distract reader or obscure meaning
Generally free or almost free of any grammatical, spelling or
punctuation errors.
Free of any and all grammatical, spelling or punctuation errors.
Demonstrates sophisticated awareness and use of grammar and
written mechanics. Free of any and all grammatical, spelling or
punctuation errors.
Style and Appropriateness
Somewhat uses an appropriate, professional style and tone for
the audience. Ability to somewhat analyze and address the
needs of the assignment and intended audience.
Generally uses an appropriate, professional style and tone for
the audience Suitable ability to analyze and appropriately
address the needs of the assignment and intended audience.
Mostly uses an appropriate, professional style and tone for the
audience Good ability in analyzing and appropriately addressing
the needs of the assignment and intended audience.

37. Consistently uses an appropriate, professional style and tone for
the audience. Strong ability in analyzing and effectively
addressing the needs of the assignment and intended audience.
Organization
Lacks a consistently organized, logical and effective message.
Main points somewhat clear. Paragraphs reasonably coherent
with some effective transitions.
Presents a generally organized, logical and effective message.
Main points mostly identified. Paragraphs are generally
coherent with effective transitions.
Presents an organized, logical and effective message. Main
points clearly identified.
Paragraphs coherent with effective transitions.
Presents an organized and influential message supported by very
clearly identified main points. Paragraphs coherent, well
sequenced and transitions display progression of thoughts/ideas.
Design and Formatting
Document formatting and supporting visuals somewhat enhance
the effectiveness of the presentation and slightly limit
clarity/cohesiveness
Document formatting and supporting visuals appropriately
enhance the effectiveness of the presentation and its
clarity/cohesiveness
Document formatting and supporting visuals display creativity
and appropriately enhance the effectiveness of the presentation
and its clarity/cohesiveness
Document formatting and supporting visuals strongly enhance

38. the effectiveness of the presentation and its clarity/cohesiveness