Chapter 4: Completing the Cycle
THE FULL ACCOUNTING CYCLE — CHAPTERS 1–4
TrueWheel Bike Repair · March 2026 · the problem solved in the video
Work this on paper BEFORE you watch the solution, or pause at each station and race me. Everything below is everything you need — no figure is hidden.
The situation
Sam Doyle opens TrueWheel Bike Repair on March 1, 2026. The shop's fiscal year end is March 31, 2026. These are the twelve transactions of its first month.
Part A — The twelve transactions
| # | Date | Transaction |
|---|---|---|
| 1 | Mar 1 | Sam invests $15,000 cash in the business. |
| 2 | Mar 1 | Buys repair equipment for $7,200 — pays $2,200 cash, the remaining $5,000 on account. The equipment is expected to serve 36 months. |
| 3 | Mar 2 | Pays March rent, $950 cash. |
| 4 | Mar 2 | Pays $3,600 cash for a 12-month insurance policy, coverage beginning March 1. |
| 5 | Mar 4 | Buys shop supplies, $1,300, on account. |
| 6 | Mar 8 | The Ridgeline Cycling Club pays $800 in advance for 10 tune-ups at $80 each. None are done yet. |
| 7 | Mar 12 | Bills customers $4,700 for repairs already completed. |
| 8 | Mar 16 | Pays the mechanic $1,900 for the first half of March. |
| 9 | Mar 19 | Pays $2,000 to suppliers on account. |
| 10 | Mar 22 | Collects $2,750 from customers on account. |
| 11 | Mar 26 | Walk-in repairs for cash, $1,750. |
| 12 | Mar 31 | Sam withdraws $1,050 cash for personal use. |
Part B — The March 31 adjustment facts
| a | A count of supplies finds $450 still on the shelf. |
| b | One month of the insurance policy has expired. |
| c | The equipment has been used for one month of its 36-month life. |
| d | 5 of the club's 10 tune-ups have been completed. |
| e | The mechanic has worked the second half of March, $750, unpaid at month end. |
| f | A cargo-bike overhaul, $650, was finished and delivered on March 31 — the invoice has not been sent. |
Part C — What to do
- 1Journalize the twelve transactions.
- 2Post to the ledger (T-accounts) and total every account.
- 3Prepare the unadjusted trial balance at March 31, 2026.
- 4Journalize and post the six adjusting entries.
- 5Prepare the adjusted trial balance.
- 6Prepare, in order, the income statement, the statement of owner's equity, and a classified balance sheet.
- 7Journalize and post the closing entries.
- 8Prepare the post-closing trial balance.
Check figures
The solution
The full worked solution, step by step