Bbus 210 Financial Accounting Project 1 Developing Financial ✓ Solved

Bbus 210 Financial Accountingproject 1 Developing Financial Statem

Bbus 210 Financial Accountingproject 1 Developing Financial Statem

BBUS 210 – Financial Accounting Project 1 - Developing Financial Statements 2 | P a g e Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they’ll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes course for outdoor enthusiasts. On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 20,000 shares of common stock for $1 each. Each share of stock represents a unit of ownership. Tony and Suzie will act as co-presidents of the company.

Sample Paper For Above instruction

Introduction

The formation of new businesses requires careful planning and financial structuring to ensure sustainable growth and profitability. This paper demonstrates the process of developing financial statements for a newly incorporated company, Great Adventures Inc., founded by Tony and Suzie in July 2021. The primary objective is to illustrate the initial accounting entries, financial statement preparation, and the underpinning principles involved in establishing a corporation with a focus on its equity structure.

Company Background and Business Activities

Tony and Suzie, recent college graduates, launched their outdoor adventure business aiming to provide clinics, organize adventure races, and eventually expand into selling outdoor gear and creating a ropes course. Their business model involves activities such as mountain biking, kayaking, orienteering, and trail running, targeting outdoor enthusiasts.

Legal Formation and Initial Capital

On July 1, 2021, Tony and Suzie incorporated Great Adventures Inc., a corporation authorized to issue 20,000 shares of common stock at $1 per share. This step involves recording the initial issuance of shares, which constitutes the primary source of capital for the company.

Journal Entries for Initial Transactions

The initial transaction involves issuing 20,000 shares of common stock for $1 each. The entry in the company's books would be:

Debit: Cash $20,000


Credit: Common Stock $20,000

This reflects the inflow of cash from investors (Tony and Suzie), increasing the company's assets and equity.

Financial Statement Development

The initial balance sheet of Great Adventures Inc. would list:

  • Assets: Cash $20,000
  • Liabilities: $0
  • Shareholders’ Equity: Common Stock $20,000

There are no other transactions at this point, so retained earnings or other equity components are zero.

Implications for Future Financial Statements

As the company progresses, additional transactions such as expenses, revenues, investments, and loans will be recorded, impacting the income statement and balance sheet. The initial capitalization sets a foundation for subsequent accounting periods.

Conclusion

This case highlights the importance of accurately recording initial equity transactions in new businesses, preparing the first financial statements, and understanding the basic structure of a corporation’s financial position. Proper documentation and adherence to accounting principles ensure transparent financial reporting, essential for attracting investors and managing operations.

References

  • Bethel, R. (2020). Financial Accounting: Tools for Business Decision Making. McGraw-Hill Education.
  • Horngren, C. T., Sundem, G. L., Elliott, J. A., & Philbrick, D. R. (2020). Introduction to Financial Accounting. Pearson.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2021). Financial Statement Analysis. McGraw-Hill Education.
  • Gibson, C. H. (2019). Financial Reporting & Analysis. Cengage Learning.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2020). Financial Accounting Theory and Analysis. Wiley.
  • Fraser, L. M., & Ormiston, A. (2019). Understanding Financial Statements. Pearson.
  • Ellman, A., & Amat, O. (2022). Accounting and Finance Principles. Routledge.
  • McLaney, E., & Atrill, P. (2021). Financial Statements: A Step-by-Step Guide to Understanding and Preparing Financial Reports. Routledge.
  • Padachi, K. (2018). Financial Accounting: An Introduction. Nova Science Publishers.
  • Williams, J., Haka, S., Bettner, M., & Carcello, J. (2019). Financial & Managerial Accounting. McGraw-Hill Education.

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