Week 4 — Month-End at the Bicycle Shop: Six Adjustments, One Balance

Assignment 4 of the term — compute the bicycle shop's month-end adjustments, record and classify them, prove the adjusted trial balance, and set a founder straight about why the books needed adjusting.

This adaptive assignment uses a coaching dialogue to help you turn a first attempt into a clear, evidence-based report. You remain the author. The coach asks questions, checks the reasoning you show, and waits for you to revise before it produces the required report. This week's lecture tutorial, quiz, discussion, and Accounting Workshop practise the same ideas from other angles; this assignment is where you put them together. It builds on Week 3, where you journalized the shop's twelve transactions, posted them, and proved the unadjusted trial balance.

The task

This week's material is pinned. Under the accrual basis, revenues are recorded when earned and expenses when incurred, regardless of when cash moves, and GAAP requires accrual-basis statements. Revenue recognition follows the five steps of the FASB's Accounting Standards Update No. 2014-09 (May 2014); the fifth step is to "recognize revenue when (or as) the entity satisfies a performance obligation". An accrual or deferral adjusting entry affects one income statement account and one balance sheet account, and never Cash. Deferrals are adjustments where cash moved first (prepaid expenses and unearned revenues); accruals are adjustments where cash moves later (accrued revenues and accrued expenses); depreciation is the allocation of a long-lived asset's cost to the periods that use it, credited to Accumulated Depreciation, a contra asset.

The running case is an illustrative, unnamed bicycle repair and sales shop, organized as a corporation by two founders; it describes no real business. Its six month-end adjustments for Month 1 are (a) supplies used, (b) insurance expired, (c) depreciation, (d) unearned revenue earned as the shop performs one quarter of a cycling club's $1,200 season of tune-ups, (e) $400 of wages the mechanic earned but has not been paid, and (f) $250 of repairs finished for a delivery company but not yet billed.

One of the founders (an illustrative person) sends you this message: "Our bank balance is $17,100 and our trial balance already balanced at $36,800, so why are we adjusting anything? The cycling club paid us $1,200, so that's $1,200 of revenue. And depreciation is only a guess at what the equipment would sell for." Your job is to answer the way this course would, starting from four small calculations on the shop's books.

Work these four problems, showing your arithmetic:

1. The bicycle shop bought $900 of supplies during Month 1, and a count on Day 31 finds $350 of supplies on hand. How many dollars of supplies were used in Month 1?
2. The bicycle shop paid $2,400 for a 12-month insurance policy that began on Day 1. How many dollars of insurance expired in Month 1?
3. The bicycle shop's equipment cost $12,000 and is expected to last 5 years of 12 months each, with no residual value. How many dollars of depreciation belong to one month?
4. The bicycle shop's unadjusted trial balance shows $36,800 on each side, and three month-end adjustments each add a new amount to both sides: $200 of depreciation, $400 of accrued wages, and $250 of accrued revenue. What total does the adjusted trial balance show on each side?

Beside each answer, add one brief interpretation:

• Problem 1: write adjustment (a) as a journal entry, debit first and credit second, and name its kind; then say why the entry does not use Cash.
• Problem 2: write adjustment (b) as a journal entry and name its kind; then give the Prepaid Insurance balance after it.
• Problem 3: write adjustment (c) as a journal entry, give the equipment's book value after it, and explain why Accumulated Depreciation is a contra asset and why depreciation is not market value.
• Problem 4: sort all six adjustments, (a) to (f), as deferrals or accruals; explain why (a), (b), and (d) do not change the trial balance total; and use the fifth step of revenue recognition to explain how much of the club's $1,200 the shop has earned and why the rest is still Unearned Revenue.

Explain it to a non-expert

The founder means well and has three things wrong. Write a 3–5 sentence message that explains why a balanced trial balance and a healthy bank balance do not make the month's numbers complete, why the club's $1,200 is not all revenue yet, and why depreciation spreads the equipment's cost rather than measuring its price. Name one limit, such as that the supplies count and the five-year life are estimates a lender would want explained, or that this course gives no tax advice. Explain any technical term in everyday words. More than one good answer is possible.

For a different, ungraded example, imagine a roommate who says a concert ticket bought months ahead "is already used up, because the money is gone." Model answer: "The money left your account when you bought the ticket, but you have not used the show yet; until the night of the concert, the ticket is something you still have, not something you have spent. Paying and using happen on different days. One caveat is fair: if the show is canceled and no refund comes, the ticket may turn out to be worth nothing, so it is worth keeping an eye on."

Use that pattern for the founder, with your own wording and evidence.

Part 1 — Student instructions

1. Draft all four answers, the four brief interpretations, and your message to the founder before opening a chatbot.
2. Open any course-approved chatbot. Copy the entire Coach Prompt box, including its first and last marker lines, and paste it as one message. The coach will ask for your draft and then work one question at a time.
3. Reply in your own words. Show calculations when asked. Use the coach's feedback to revise at least one calculation or explanation, even if your first attempt was correct.
4. Continue until the prompt's exit condition is met.
5. Save the chat's share link and copy the final report exactly as the coach gives it.

The chatbot is a coach, not a ghostwriter. It must draw out your reasoning rather than write the work for you. Add up the debits and credits of every entry it mentions yourself, and check every claim it makes about a standard against Chapter 4 before you use it.

Coach Prompt

COPY EVERYTHING BELOW THIS LINE
ROLE: You are a careful learning coach for an introductory financial accounting course. Draw out and challenge MY thinking about accrual accounting and the bicycle shop's month-end adjustments. Do not write my assignment for me, do not invent work I did not show, and never invent a standard, a rule, a rate, a statistic, or a quotation. Every journal entry I write must list the debit first and the credit second, and its debits must equal its credits. Give no tax or investment advice.

ASSIGNMENT: Work through these four problems in order, one at a time. Do not invent, replace, or reorder a problem. The pinned facts: under the accrual basis, revenues are recorded when earned and expenses when incurred, and GAAP requires accrual-basis statements. The fifth step of the FASB's Accounting Standards Update No. 2014-09 (May 2014) is to recognize revenue when (or as) the entity satisfies a performance obligation. An accrual or deferral adjusting entry affects one income statement account and one balance sheet account, and never Cash. Deferrals: cash moved first (prepaid expenses, unearned revenues). Accruals: cash moves later (accrued revenues, accrued expenses). Depreciation allocates a long-lived asset's cost and is credited to Accumulated Depreciation, a contra asset. The bicycle shop is illustrative. Its six adjustments are (a) supplies used, (b) insurance expired, (c) depreciation, (d) one quarter of a cycling club's $1,200 season of tune-ups performed, (e) $400 of unpaid wages, and (f) $250 of repairs finished but not billed.
PROBLEM P1: The bicycle shop bought $900 of supplies during Month 1, and a count on Day 31 finds $350 of supplies on hand. How many dollars of supplies were used in Month 1?
PROBLEM P2: The bicycle shop paid $2,400 for a 12-month insurance policy that began on Day 1. How many dollars of insurance expired in Month 1?
PROBLEM P3: The bicycle shop's equipment cost $12,000 and is expected to last 5 years of 12 months each, with no residual value. How many dollars of depreciation belong to one month?
PROBLEM P4: The bicycle shop's unadjusted trial balance shows $36,800 on each side, and three month-end adjustments each add a new amount to both sides: $200 of depreciation, $400 of accrued wages, and $250 of accrued revenue. What total does the adjusted trial balance show on each side?
After the four results, I must briefly interpret each one: for P1, adjustment (a) as a journal entry with its kind, plus why it does not use Cash; for P2, adjustment (b) as a journal entry with its kind, plus the Prepaid Insurance balance after it; for P3, adjustment (c) as a journal entry, the equipment's book value after it, and why Accumulated Depreciation is a contra asset and depreciation is not market value; for P4, all six adjustments sorted as deferrals or accruals, why (a), (b), and (d) leave the total unchanged, and how much of the club's $1,200 is earned under the fifth step and why the rest is Unearned Revenue. I must then write a 3-5 sentence message to a founder who thinks a balanced trial balance makes adjusting unnecessary, that the club's $1,200 is all revenue, and that depreciation measures what the equipment would sell for, with one limit. I must explain technical terms in everyday words.

SCORING CRITERIA: Score only evidence I supply: computing the adjustments (40 points), recording and classifying the entries (32 points), clarity for a non-expert reader (16 points), and showing work so it can be checked (12 points). For each of P1-P4, give 2, 1, or 0 evidence units per criterion; one unit is worth 5 computing points, 4 recording points, 2 clarity points, or 1.5 showing-work points. Sum all four problems within each criterion. Count my message to the founder only with P4, not again with P1-P3.
COMPUTING UNITS: A correct dollar amount or total = 2; the right figures and operation with only an arithmetic slip = 1; a missing value or the wrong figures or operation = 0. Do not penalize an alternative valid method or equivalent correct notation.
RECORDING UNITS: For P1-P3 separately, an interpretation that meets both parts named for that problem = 2; exactly one part = 1; neither = 0. For P4, BOTH the six adjustments sorted correctly with the reason three of them leave the total unchanged and the club's revenue explained with the fifth step, AND a message to the founder that covers the incomplete numbers, the club's $1,200, and depreciation as cost allocation, with a named limit = 2. If full P4 evidence is absent but at least one accurate substantive part appears, give 1. No accurate reading = 0; naming a term alone does not earn a unit, and an entry that touches Cash, a reversed debit and credit, the club's whole $1,200 called revenue, Accumulated Depreciation called a liability, or depreciation called market value is not accurate. An arithmetic slip alone is not a recording error.
CLARITY UNITS: For each problem, labeled evidence understandable to someone new to accounting, with technical terms explained = 2; intelligible evidence that needs rereading because of ambiguity or jargon = 1; absent or unintelligible evidence = 0. Include the message to the founder with P4 if submitted. Missing reasoning alone does not lower clarity for otherwise clear submitted work.
SHOWING-WORK UNITS: For each problem, checkable figures and steps = 2; a relevant but incomplete figure or step = 1; a result alone or no method = 0. A visible method stays checkable despite an arithmetic slip.

Do NOT invent grading rules.

DIALOGUE RULES: Ask exactly one question per message and wait for my reply. Start by asking for my complete first attempt. Build each next question from my exact words. Probe an unsupported claim and ask me to examine its evidence. Keep the conversation focused on questions rather than completed work.

ENGAGEMENT GUARDS: A greeting, copied prompt, yes/no reply, or one-word reply is not a substantive exchange. Do not flatter or accept agreement as evidence. Praise only a concrete move I made. If evidence is missing, say what is missing and ask for it. Require a real revision plus a short reflection on why the revision is better. Do not issue the report early.

EXIT CONDITION: Continue until at least five substantive exchanges have occurred AND I have supplied all four results and their brief interpretations AND written my message to the founder AND revised at least one calculation or explanation AND reflected on the revision. Stop only after whichever requirement happens last.

REPORT: After the exit condition is satisfied, output exactly these labelled lines in this order. Replace X with the exact earned score; it may end in .5 and must not be rounded to a whole number. Base every line only on evidence in this chat; write "Not supplied" for missing evidence and never raise the score for polished chatbot prose.
STUDENT'S SCORE: X/100
EVIDENCE FOR THE SCORE: [specific evidence from my calculations and reasoning]
REVISION MADE: [what I changed and why]
STRENGTH: [one earned strength]
NEXT STEP: [one concrete improvement]
Then tell me to submit this report, my revised work, and the share link.
COPY EVERYTHING ABOVE THIS LINE

Deliverables

Submit these three items in the assignment entry:

• your revised work with all four results, their brief interpretations, the three journal entries, the deferral-and-accrual sort, and your message to the founder — written, or recorded as audio or video with a transcript, or as a labelled spreadsheet of the entries with a short explanation; every form is graded by the same scoring criteria;
• the coach's five-line report; and
• the conversation share link.

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.

Equivalent route (no AI required)

This route assesses the same Week 4 skills — computing the bicycle shop's month-end adjustments, recording them as balanced journal entries that never touch Cash, sorting them as deferrals and accruals, proving the adjusted trial balance, and explaining revenue recognition and depreciation in plain words — for comparable time and effort, about 60 to 90 minutes, the same as the coached route. Complete the same four problems, the four brief interpretations, the three journal entries, the sort, and the message to the founder. Then audit your own first draft against the attached scoring criteria, criterion by criterion, and write a second draft. Add a 150–200 word revision memo that names one calculation or explanation you changed, the evidence that prompted the change, and one question you still have about this week's material. Submit the revised work, your completed criteria checklist, and the revision memo in the assignment entry; together they replace the share link and the coach's report. This route uses the same scoring criteria and the same points, with no penalty for choosing it.

How you'll be graded

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

Academic integrity and AI use

The calculations, entries, reasoning, revision, and final report must be your own. Do not ask the chatbot to create the assignment or add evidence you did not produce, and do not let it put Cash in an adjusting entry, call the club's whole $1,200 revenue, or treat Accumulated Depreciation as a liability. Submit an honest share link from your own dialogue. The equivalent route keeps the same workload and evidence and requires no AI account.

Built with The Course Maker · samples.thecoursemaker.com