Week 2 · Assignment: Traditional alternative (no AI)

Week 2 — Twelve Transactions, One Equation: The Shop's First Month — Traditional alternative (no AI)

Financial Accounting Free sample edition

Traditional alternative (no AI), unpublished. In the course this is a separate assignment that ships unpublished beside the adaptive assignment: same objective, no AI. An instructor who prefers it publishes it and unpublishes or deletes the adaptive one, as the note at its top says.

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

Assignment 2 of the term — analyze the bicycle shop's twelve Month 1 transactions in the accounting equation, find the month's totals and its effect on retained earnings, and explain to someone outside accounting why the owners' claim is not the shop's cash.

This week you learned assets, liabilities, and stockholders' equity; the accounting equation, Assets = Liabilities + Stockholders' Equity; the two parts of equity, Common Stock and retained earnings; what raises and lowers retained earnings; and the four-question routine for transaction analysis. In Week 1 you learned who reads financial statements and that a corporation is an entity separate from its owners. 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.

The task

You will use Dataset A from this week's chapter: the twelve Month 1 transactions of the course's running case, an illustrative bicycle repair and sales shop organized as a corporation by two founders. It describes no real business. Here are the twelve events, in order:

Day 1: the founders invest $30,000 cash in exchange for 30,000 shares of $1-par common stock.
Day 2: the shop pays $12,000 cash for repair equipment.
Day 3: it buys $900 of shop supplies on account.
Day 4: it pays $2,400 for a 12-month insurance policy that begins on Day 1.
Day 6: a cycling club pays $1,200 in advance for a season of tune-ups not yet performed.
Day 15: it performs repairs for walk-in customers and collects $3,500 cash.
Day 18: it performs $1,800 of repairs for a delivery company on account.
Day 20: it pays $1,500 rent for the month.
Day 22: it pays $600 of the $900 owed for supplies.
Day 25: it collects $1,000 from the delivery company on its account.
Day 28: it pays $1,600 wages to its part-time mechanic.
Day 30: it pays a $500 cash dividend to the shareholders.

Use no debits or credits this week; show every change as a plus or a minus to a named account.

Part A — analyze all twelve. For each transaction, write the four questions' replies in one line: what happened; which accounts change; in which direction and by how much; and the running totals of assets, liabilities, and stockholders' equity after it, checked so that assets equal liabilities plus equity. Then name which of the five patterns each transaction follows (asset swap; asset and liability both up; asset and liability both down; asset and equity both up; asset and equity both down). Then work this problem, showing your reasoning:

After the twelve transactions, the shop's asset balances are Cash $17,100, Accounts Receivable $800, Supplies $900, Prepaid Insurance $2,400, and Equipment $12,000. What are the shop's total assets?

Part B — retained earnings and the check. Work this problem first, showing your reasoning:

In Month 1 the shop's revenues total $5,300, its expenses total $3,100, and it pays $500 of dividends. What is the month's total effect on retained earnings?

Then show that total stockholders' equity is Common Stock plus that effect, and that total liabilities plus total stockholders' equity equals the total assets you found in Part A. In two or three sentences, say why the $500 dividend lowers retained earnings but is not an expense, and why the $1,200 from the cycling club is not revenue in Month 1.

Explain it to a non-expert

A friend who is thinking of lending the shop money looks at your work and asks, "The shop shows more stockholders' equity than cash, but equity is what the owners have, so that much must be in the bank, right?" Write a 3–5 sentence message in everyday words that explains what stockholders' equity is, why it is not the same as the shop's cash, and one honest limit of these Month 1 totals (they come before any month-end updates). Explain any term your friend might not know.

For a different, ungraded example, imagine a roommate who asks why their "net worth" is not the same as the money in their checking account. Model answer: "Your net worth is everything you own minus everything you owe, so it counts your laptop and your bike, not just your checking account. If you still owe a friend for concert tickets, that debt comes off the top. So your net worth can be bigger or smaller than your bank balance. One limit: it is a snapshot of one day, and it changes as soon as you buy or pay something."

Use that pattern for your message to the friend, with your own explanation of the shop.

Revise and reflect

Put your first draft away for a few hours, then reread it against Chapter 2. For each of the twelve transactions, add the running totals again and confirm that assets equal liabilities plus equity; circle every transaction where equity changes and name the driver (an owner investment, a revenue, an expense, or a dividend); and check that your message says equity is a claim on the shop, not cash in the bank. Make at least one change and keep both versions. Then answer one of these two options in 2–4 sentences; they carry the same weight:

(a) Which change made one of your transaction analyses more exact, and which definition showed you it was needed?
(b) Which of this week's classic wrong turns did your first draft come closest to, and what question will you ask yourself next time to catch it?

Deliverables

Submit one document, spreadsheet, or recording that contains, in this order:

your Part A analyses of the twelve transactions, with running totals and patterns, and total assets worked as a sum of the five balances;
your Part B retained earnings work, the equity and equation check, and your two explanations;
your message to the friend;
your first and revised versions of the part you changed, and your reflection.

Choose how you show it. Present your work as written text, as a spreadsheet with a sentence under each part, or as a recorded audio or video explanation of about five minutes with a transcript. Every form is graded by the same scoring criteria. 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

This version is designed to be completed without AI: do the analyses, the arithmetic, and the writing yourself, without a chatbot or other AI tool. Submitting AI-generated work as your own, or copying another student's work, is an integrity violation under the course policy.

Built with The Course Maker · samples.thecoursemaker.com