Accounting project

All details will be provided in the uploaded files below.

To: PwC Employee
From: Team Lead
Subject: Prepare Journal Entries – Run Forever
Hi PwC Employee,
I am following up on the client we discussed earlier today in our huddle.
Running coaches and friends Dash, Sprint, and Bolt just bought a coaching company and gym, called Run
Forever, from their friend, Speed. They’ve been the owners for the last quarter, but have no idea how to keep
track of their business transactions and activities. They’d like to buy a new treadmill for their gym, but don’t
know if they have the cash to do it. They did jot down all the money they spent and all the money they
received for the last quarter:
1. Paid Speed $200,000 to purchase the business
2. Each owner put $10,000 into the company bank account as Contributed Capital on April 1, 2021
3. Paid rent for April, May, June, on the first of each month; and prepaid for July on June 30, 2021, at
$3,000 per month
4. Collected $17,000 in cash for coaching services from clients who pay at the end of each session
5. Charged $11,000 on client credit cards for coaching services from clients who pay at the end of each
session; still awaiting payout from credit card companies
6. Collected $5000 from credit card companies for coaching services that were previously paid by clients
on credit card at the end of each session
7. Collected $6,000 in cash from clients who signed up for a pack of 10 coaching sessions. Of these clients,
half of the sessions remain to be used, even though the clients have already paid Run Forever the cash
8. Purchased a new spin bike for the gym for $1000 on May 1, 2021. The bike has a useful life of 3 years
9. Used supplies throughout the quarter (paper towels, sanitizer, disposal masks). Did not keep track of
the supplies used, but you went and checked their inventory and calculated that about $1,800 of
supplies is still left
10. Did not pay or record salaries for themselves, totaling $60,000 for the quarter
11. Paid salaries for two coaches on June 30, 2021, totaling $10,000
12. Insurance on the gym was prepaid by the previous owner for the entire 12 months starting January 1,
2021. Three months passed this quarter under the new owners.
13. Paid off a balance of $7,000 that had been owed on previously purchased weights and benches with a
local supplier, leaving the company with no outstanding debt.
They also gave us financial statements created by the previous owner for the quarter ended March 31, 2021,
just before they bought the company on April 1, 2021.
Your Team Lead
Run Forever Balance Sheet
As of March 31, 2021
ASSETS
Cash
$
Accounts Receivable
$
Supplies inventory
$
Equipment
$
50,000
less:
accumulated
depreciation $ (30,000)
$
Prepaid insurance
$
Total Assets
$
80,000
5,000
4,000
20,000
3,000
112,000
LIABILITIES
Accounts payable
$
7,000
Total Liabilities
$
7,000
STOCKHOLDERS’ EQUITY
Common Stock
Retained Earnings
$
$
18,000
87,000
Total Stockholders’ Equity $
105,000
Total Liabilities + Stockholders’ Equity
$ 112,000
Run Forever Income Statement
for the Quarter Ended March 31, 2021
Revenues
Cost of Coaching Services (Coach Salaries)
Gross Margin
$
$
$
70,000
35,000
35,000
Rent Expense
Insurance Expense
Depreciation Expense
Supplies Expense
$
$
$
$
(3,000)
(1,000)
(2,500)
(500)
Total Expenses
$
(7,000)
Net Income
$
28,000
Run Forever Statement of Cash Flows
for the Quarter Ended March 31, 2021
Cash from Operating Activities
Net Income
Insurance Expense
Depreciation Expense
Supplies Expense
Decrease in Accounts Receivable
Increase in Accounts Payable
Total cash from Operating Activities
$
$
$
$
$
$
28,000
(1,000)
(2,500)
(500)
1,500
2,000
######
Cash from Investing Activities
$
–
Cash from Financing Activities
$
–
Net Increase in Cash
######
Run Forever Statement of Stockholder’s Equity
for the Quarter Ended March 31, 2021
Beginning Balance, January 1, 2021
Net Income
Ending Balance, March 31, 2021
Common Additional
Stock, $1
Paid In
Retained
par value
Capital
Earnings
Total
$ 3,000 $ 15,000 $ 59,000 $ 77,000
$ 28,000 $ 28,000
$ 3,000 $ 15,000 $ 87,000 $ 105,000