Week 1 — Reading the Bicycle Shop's Plan: Form, Entity, and Users — Traditional alternative (no AI)

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Assignment 1 of the term — read the running case the way an accountant reads any business before recording a thing, and explain the field to someone new to it.

This assignment asks you to work on your own from Chapter 1 and the bicycle shop's plan. This week's lecture tutorial, quiz, discussion, and Accounting Workshop practice the same ideas from other angles; this assignment is where you put them together on one business's plan.

The task

Your shared data is the course's running case (illustrative): an unnamed bicycle repair and sales shop, organized as a corporation by two founders. It describes no real business. Its plan for Month 1 reads:

• The two founders plan to invest $30,000 cash in exchange for 30,000 shares of $1-par common stock.
• The shop plans 12 transactions for Month 1.
• Shareholders appear in 2 of them: the founders' investment and a $500 cash dividend.
• Customers appear in 4: a cycling club pays $1,200 in advance for tune-ups; walk-in customers pay $3,500 cash for repairs; a delivery company is billed $1,800 on account; that company pays $1,000 of it.
• Vendors appear in 5: the $12,000 equipment purchase; $900 of supplies bought on account; the $2,400 insurance policy; the $1,500 rent; a $600 payment to the supplier.
• The employee, a part-time mechanic, appears in 1: the $1,600 wages.

Work these four problems, showing your arithmetic and citing your evidence:

1. The bicycle shop's two founders plan to invest $30,000 cash in exchange for 30,000 shares of $1-par common stock. What does one share cost?
2. The bicycle shop plans 2 transactions with shareholders, 4 with customers, 5 with vendors, and 1 with its employee in Month 1. How many planned transactions is that in all?
3. Of the bicycle shop's 12 planned Month 1 transactions, 2 have the founders on the other side as shareholders. In how many of the 12 does someone other than the founders stand on the other side?
4. The AICPA Code of Professional Conduct sets out 6 principles. You test each principle against 2 scenes: the bicycle shop's founders preparing statements for a future lender, and a food truck owner asked to leave one sale out of the records. How many principle-and-scene pairs do you consider in all?

Beside each answer, add one brief interpretation:

• Problem 1: say what the two founders become and what limited liability means for them, and explain why the $30,000 belongs to the shop rather than to either founder.
• Problem 2: name the parties among these groups who are external users of the shop's financial statements and the branch of accounting that serves them, and explain how one founder can be both an internal user and an external user.
• Problem 3: name three of those other parties and the question each would ask of the shop's statements, and say who sets GAAP and which federal agency holds legal authority over public-company reporting.
• Problem 4: name the principle most directly tested in each scene and say why, and then write the message to your friend described below.

Explain it to a non-expert

A friend who is opening a phone-repair kiosk as its only owner says, "Since I'm the only owner, my personal spending and the kiosk's spending are the same money, and anyway the accounting rules come from a government agency." Write a 3–5 sentence message that corrects both parts of that claim in everyday words, using the economic entity assumption and who writes GAAP, and names one limit of what you can say after one week (for example, that this course gives no tax or legal advice about how to set up a business). Explain any technical term in everyday words. More than one good message is possible.

For a different, ungraded example, imagine a cousin who runs a home bakery asking whether the income statement shows how much cash the bakery has in the bank. Model answer: "Not quite. The income statement shows what the bakery earned and what it spent over a period, like one month. Cash in and out has its own report, the statement of cash flows. The two can tell different stories in the same month, so it helps to read both."

Use that pattern for your message to the friend, with your own wording and evidence.

Check and revise your own work

Before you submit, check every count against the bicycle shop's plan and every date, body, and principle against Chapter 1. Then choose one reflection and write three or four sentences: (a) name one answer or explanation you changed after checking, and say what evidence prompted the change; or (b) name the idea from this week that was hardest to put into your own words, and say how you worked it out.

Deliverables

Submit one document in the assignment entry with:

• your four answers with the arithmetic shown, their four brief interpretations, and your message to the friend — written, or recorded as audio or video with a transcript, or as a labelled sketch of the shop's outside readers with each one's question, plus a short note; every form is graded by the same scoring criteria; and
• your three-to-four-sentence reflection, (a) or (b).

Submit in any accessible file type or as a link; a recorded response may be submitted as audio or video with a transcript, or as text.

How you'll be graded

The full analytic rubric is attached to this assignment in Canvas.

Academic integrity and AI use

The calculations, reasoning, and writing you submit must be your own, built from Chapter 1 and the bicycle shop's plan. No chatbot is needed for any part of this assignment. Check every date, standard, and principle you state against Chapter 1, and credit any outside source you consult.

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