Week 6 · Accounting Workshop

Week 6 Accounting Workshop: The Bicycle Sale, Entry by Entry

Financial Accounting Free sample edition

Part 1 — The Big Picture

This week you learned how a business that buys goods and resells them records what the goods cost and what they earned. In this workshop you keep one small set of books end to end: the bicycle shop's first purchase and sale of bicycles. You record the purchase, the freight, the early payment, and the sale's two entries; follow the Inventory account from 10 bicycles to 4; compute cost of goods sold and gross profit; lay out the top of a multi-step income statement in a free spreadsheet; read what it shows in one plain sentence; and then check a chatbot's version of the same work. This is the record-and-post mode of the Accounting Workshop: the journal and the Inventory account carry the weight, and the analyze-and-explain work happens in your plain-sentence reading and your critique.

Time budget: Plan for about 90 minutes.

Part 2 — The Task

Guiding question: What did the bicycle shop's 10 bicycles really cost, freight and discount included, and how much of the 6 bicycles' selling price is left after that cost?

Workshop data: Dataset C, the bicycle shop's first purchase and sale of bicycles (illustrative)

Source: The running case's first merchandising transactions: an illustrative, unnamed bicycle repair and sales shop, organized as a corporation by two founders, buys and sells its first bicycles in a perpetual inventory system; it describes no real business.

Rows: 5 transactions to record (the purchase, the freight, the payment, and the sale's revenue and cost); the entry table has 5 rows, the Inventory account table has 4 rows plus a balance row, and the statement table has 4 rows
Purchase: 10 bicycles at $400 each on account, terms 2⁄10, n⁄30, FOB shipping point
Freight: $180, paid by the shop to the carrier
Payment: paid to the supplier within the 10-day discount period
Sale: 6 bicycles at $820 each on account
System: perpetual: Inventory and Cost of Goods Sold are updated with every purchase and every sale

Part 3 — Materials & Procedure

Tools and materials

A free spreadsheet (Google Sheets, or any free spreadsheet) for journals, T-accounts, trial balances, schedules, and statements, with every total computed by formula; the SEC's free EDGAR search for public companies' annual reports; and one approved chatbot used as a sparring partner whose entries, totals, and claims about standards and tax rates the student checks by hand and against the pinned source before trusting them
A free spreadsheet (Google Sheets, or any free spreadsheet)
One approved chatbot

Ways of working

record-and-post
adjust-and-report
analyze-and-explain

Procedure

Read Dataset C in Part 2 twice. For each of the five transactions, write one line in your own words saying what happened and which accounts it changes. Check: Five short lines, one per transaction, each naming the accounts that change.
Open a new sheet and copy the entry table from Part 4. For each transaction, compute the amount and write the account or accounts debited and credited, with all debits listed before all credits. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: Five rows filled; the payment row has one debit and two credits, and every row's debits equal its credits.
On a second tab, copy the Inventory account table from Part 4, enter each step's debit or credit, and compute the running balance with a formula after every step. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: The running balance reads 4,000, then 4,180, then 4,100, then 1,640 after the sale.
Total the debit and credit amounts of all five entries with SUM formulas, add a check cell that subtracts the credit total from the debit total, and then fill in the statement table from Part 4 with a formula for gross profit and for gross margin. Tool: A free spreadsheet (Google Sheets, or any free spreadsheet). Check: The check cell shows 0, and gross profit and gross margin are formulas that use Sales Revenue and Cost of Goods Sold.
Answer the analysis questions in Part 5, including the plain sentence that says what the top of the statement shows. Check: Written answers to all five questions.
Paste your three tables and then the Part 6 prompt into one approved chatbot. Compare every entry, every total, and every claim about a standard or a rate with your own work and with Chapter 6, and write the critique report, or complete the equivalent route instead. Tool: One approved chatbot. Check: A three-to-five-sentence report that quotes at least two of the chatbot's slips and corrects each by hand, or the marked-up equivalent-route analysis.

Fallback route

When to use it: Use this route if you cannot open a spreadsheet or print the tables.

Copy the three tables by hand onto paper or into any text file, read Dataset C from this page, compute each amount and each running balance by hand, add the debit and credit totals twice, and complete every analysis question and the critique step in the same order. Submit a photo or scan of the paper, or the text file, for equal credit.

This route earns the same credit as the primary route.

Part 4 — The Scaffold

Record each transaction in the same order every time, so each entry's accounts and amounts let you check that it balances.

Student scaffold table 1
Transaction	What happened	Account(s) debited	Account(s) credited	Amount(s)
Purchase	10 bicycles at $400 each on account, terms 2⁄10, n⁄30, FOB shipping point
Freight	$180 paid to the carrier under FOB shipping point
Payment	The supplier paid within 10 days, less the 2 percent discount
Sale: revenue	6 bicycles at $820 each on account
Sale: cost	The cost of the 6 bicycles that left the floor

Follow the Inventory account through every step, so its last balance proves the cost of the bicycles still on the floor.

Student scaffold table 2
Step	Debit	Credit	Running balance
Purchase of 10 bicycles
Freight under FOB shipping point
Purchase discount
Cost of 6 bicycles sold
Balance: 4 bicycles left

Lay out the top of the multi-step income statement, so the layer that shows what the goods earned stands on its own line.

Student scaffold table 3
Line	Amount
Sales Revenue
Less: Cost of Goods Sold
Gross profit
Gross margin (gross profit ÷ Sales Revenue)

Part 5 — Analysis Questions

Compute the purchase discount, the cash paid to the supplier, and the cost of one bicycle, showing the multiplication, subtraction, and division behind each.
Compute the cost of goods sold for the 6 bicycles and the cost of the 4 left in Inventory, then check your cost of goods sold the periodic way: beginning inventory plus the cost of the bicycles bought, minus the inventory counted at the end.
Explain why the freight is added to Inventory and the discount is taken out of it, and say who would have paid the freight under FOB destination and what the 10 bicycles would then have cost.
Write one plain sentence saying what the top of the multi-step income statement shows. Then say, in words, how the cost of one bicycle and the gross profit would change if the shop had paid the supplier on the 30th day instead of within 10 days.
Choose one reflection: (a) which entry did your first instinct get wrong, and what changed your mind? or (b) name one thing the top of the statement cannot tell a lender about the shop, and the line of the multi-step statement that would tell it.

Part 6 — AI-Critique Moment

Choose one equal-credit critique route. Route A: ask an approved AI tool to critique your completed work, then check its response against your own evidence. Route B is the no-AI equivalent printed below.

Approved tools: Claude, Gemini, ChatGPT, Grok, Microsoft Copilot.

Prompt to paste:

I've pasted my completed entries, my Inventory account, and the top of my income statement above. Here is an illustrative bicycle shop that uses a perpetual inventory system. It buys 10 bicycles at $400 each on account, terms 2⁄10, n⁄30, FOB shipping point, pays $180 of freight to the carrier, and pays the supplier within 10 days. It then sells 6 of the bicycles at $820 each on account. Please write every journal entry for the purchase, the freight, the payment, and the sale, compute the cost of one bicycle, the cost of goods sold, the inventory left, and the gross profit, and lay out the top of a multi-step income statement. Then tell me: how much cash the shop has from the sale so far; which accounting rule says where the freight and the discount go; what Social Security rate and wage base would apply if the shop hires a sales clerk; whether the shop could use LIFO for its bicycles under IFRS; and what the shop's $200 a month of depreciation on its $12,000 of repair equipment says about what that equipment is worth.

Test the response for these likely failures:

Chatbots sometimes write the cost side of the sale backwards, debiting Inventory and crediting Cost of Goods Sold.
Chatbots sometimes write the payment with unequal sides, such as Accounts Payable 3,920 debited against Inventory 80 and Cash 3,920 credited.
Chatbots sometimes hold back the $4,920 of Sales Revenue until the customers pay, because the sale was on account.
Chatbots sometimes expense all 10 bicycles the day they arrive, recording $4,100 of Cost of Goods Sold at the purchase.
Chatbots often forget the discount or the freight when they total the cost, reporting $418 or $392 a bicycle instead of the right figure.
Chatbots sometimes invent a rule, such as a GAAP requirement to expense freight at once or to report purchase discounts as other income, and attribute it to the FASB.
Chatbots often quote an earlier year's Social Security wage base when asked about a new employee's payroll taxes.
Chatbots sometimes say a business reporting under IFRS may choose LIFO for its inventory.
Chatbots sometimes say the sale left the shop with $2,460 or $4,920 more cash.
Chatbots often describe the $200 a month of depreciation as the drop in what the repair equipment would sell for.
Chatbots sometimes list the $80 discount as a revenue line or the $180 freight as an operating expense below gross profit.

Write three to five sentences naming what the chatbot got right and at least two places where it slipped into one of the failures above, quoting its words and correcting each by hand against Dataset C, Chapter 6, and the pinned source.

Equivalent route (no AI required)

No AI account is required for this workshop. This route assesses the same objectives, Objective 5 (account for merchandising operations and inventory: record purchases and sales in a perpetual system, compute cost of goods sold and gross profit, and apply FIFO, LIFO, and weighted-average costing and the lower of cost and net realizable value) and Objective 2 (analyze business transactions with the accounting equation and record them in a journal using double-entry bookkeeping, post them to the ledger, and prepare a trial balance), takes comparable effort of about the same 90 minutes, uses the same rubric, and earns the same credit. Instead of the chatbot, critique this flawed analysis of Dataset C, printed here in full: "The shop recorded the 10 bicycles as Cost of Goods Sold of $4,100 the day they arrived, since they were paid for. Under FOB shipping point the supplier sent the bicycles, so the $180 freight is the supplier's cost and the shop records nothing for it. For the payment: debit Accounts Payable 3,920, credit Inventory 80, credit Cash 3,920. The $80 discount is reported as Purchase Discount Revenue on the income statement. So each bicycle cost 4,000 ÷ 10 = $400. The sale was on account, so no revenue is recorded until the customers pay. When the 6 bicycles were sold, the shop debited Inventory 2,400 and credited Cost of Goods Sold 2,400. Gross profit is 4,920 − 2,400 = $2,520, which is the cash the sale added to the bank. GAAP also requires freight to be expensed within 30 days. A sales clerk's wages would use last year's Social Security wage base. Under IFRS the shop could choose LIFO for its bicycles, and the $200 of monthly depreciation on the repair equipment shows its market value fell by $200." Mark every error you find, name the failure it shows, and correct it by hand against Dataset C, Chapter 6, and the pinned source; find at least two. The wage base it mentions is out of date on purpose and is itself one of the errors. Submit the marked-up analysis with your corrections in place of the chatbot report and share link.

Part 7 — What to Submit

The completed entry table, the Inventory account table, and the statement table from Part 4
Written answers to all five analysis questions
The chatbot critique report with its share link, or the equivalent route's marked-up flawed analysis

Deliverable:

A short Accounting Workshop report on the bicycle shop's first purchase and sale of bicycles: three completed tables (the five entries, the Inventory account, and the top of the multi-step income statement), written answers to five analysis questions, and a critique of a chatbot's version of the same work, or, on the equivalent route, a marked-up correction of the printed flawed analysis. Choose how you show it: a completed spreadsheet with written answers, a recorded explanation with a transcript, or hand-drawn tables with short notes; 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.

Rubric

The rubric below shows how each submitted part is evaluated; bands are full, partial, or none.

Workshop evaluation criteria
Criterion	Full	Partial	None
Balanced, correctly recorded merchandising entries	All five entries have the right accounts and amounts, each lists its debits before its credits and balances, the freight is debited to Inventory, and the discount is credited to Inventory.	Three or four entries are right, or all five are present but one is reversed, unbalanced, or sends the freight or the discount to the wrong account.	Fewer than three correct entries, or the discount recorded as revenue and the freight left out.
Inventory and cost of goods sold, computed and checked	The Inventory account runs correctly to 1,640, cost of goods sold is 2,460 by formula or written product, the periodic check reaches the same 2,460, and the entry totals are equal.	The Inventory balance or cost of goods sold is right but the other is wrong, or both are right without the periodic check.	No Inventory account or cost of goods sold, or cost of goods sold taken as the cost of all 10 bicycles.
Top of the statement and plain-sentence reading	The statement table shows Sales Revenue, Cost of Goods Sold, gross profit, and gross margin correctly, one plain sentence says what it shows, and the answer says in words how paying on the 30th day would change the cost and the gross profit.	The statement table is right but the plain sentence or the effect of paying later is missing or vague.	No statement table, or gross profit called net income.
Caught-and-corrected AI slip, on either route	The chatbot critique report, or the equivalent route's marked-up flawed analysis, quotes at least two errors and corrects each by hand against Dataset C, Chapter 6, and the pinned source; either route earns this band equally.	One error is quoted and corrected on either route, or errors are named without a correction.	No critique on either route, or chatbot output is pasted without checking it.
Limits and reflection	The answers explain why the freight is added and the discount is taken out, with the FOB destination contrast, and the chosen reflection option is answered with a specific entry or statement line from Dataset C.	Either the freight-and-discount explanation or the reflection is present, but not both, or one is general.	Neither the freight-and-discount explanation nor the reflection is present.

Quality Gate

Every journal entry lists all debits before all credits, and its debits equal its credits.
The freight under FOB shipping point is in Inventory, and the purchase discount is taken out of Inventory, not recorded as revenue.
The sale has two entries, and only the bicycles sold become Cost of Goods Sold.
Every running balance, both entry totals, gross profit, and gross margin are computed by formula or written as a sum.
No standard, rule, rate, statistic, or quotation is invented anywhere in the submission.
The plain-sentence reading keeps gross profit apart from net income and ranks no allowed choice as better.
The critique quotes the chatbot or the flawed analysis and corrects at least two errors by hand.

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