Spring, 2012InstructionsTRANSACTIONSA Practice Problem in AccountingThe Health and Fitness CenterSpring, 2012Instructions:Use the following balance sheet information from The Health and Fitness Centers’ month-end financial statements dated January 31, 2012 and open t-accounts for each balance sheet line item. Then use the enclosed TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations during fiscal year 2012. Use the Perpetual Inventory method as discussed in class for all sales of merchandise. The Heath and Fitness CenterBalance SheetAs of January 31, 2012Assets: Liabilities:Cash $5,000 Accounts Payable $3,600Accounts Receivable 4,500 Salaries Payable 3,500Inventory – Concessions 1,000 Interest Payable 1,875Supplies 200 Unearned Revenue 500Prepaid Insurance 4,125 Note Payable 250,000Total Current Assets 14,825 Total Current Liabilities 259,475Land 100,000 Stockholder’s EquityBuilding 300,000 Common Stock 200,000Equipment 42,000 Retained Earnings 15,360Furniture and Fixtures 19,968 Total Liab. and SHE $474,835Accumulated Depreciation (1,958)Total Assets $474,835 1Notes to Financial Statements:The Health and Fitness Center, a Texas corporation, is principally engaged in providing a fitness facility available to “club” members. The Heath and Fitness Center offers all of the latest equipment and services including, group exercise, personal training, cardiovascular equipment, Pilates and yoga, and weight lifting. The Center also provides massage services. Fiscal Year The Heath and Fitness Center was established as a business in January 2012. The Heath and Fitness Center follows a fiscal year end of December 31.Inventories Inventories consist of concessions available for resale to members. These concessions consist of energy drinks, nutritional supplements, etc. Inventories are valued on a first-in, first-out basis, using the perpetual method. (Note: The Center plans toexpand its inventory during February to include logo-based apparel.) Prepaid Insurance The Heath and Fitness Center carries property insurance through Good Hands Insurance Co. The Center purchased a 12 month policy on January 1, 2012 for $4,500.Fixed Assets Property and Equipment are stated on the basis of historical cost. Land and Building: The Land and Building was a group purchase made on January 1, 2012. The total purchase price amounted to $400,000. On the date of purchase the land was appraised at $100,000 and the building was appraised at $300,000. The Health and Fitness Center paid $150,000 down and signed a $250,000, 12-month, 9% note for the balance. Depreciation on the building is computed using the straight-line basis with no salvage value. The life of the building is estimated to be 20 years. Equipment and Furniture and Fixtures: All equipment and furniture and fixtures were purchased for cash on January 1, 2012. Both equipment and furniture and fixtures are depreciated using the straight-line method of depreciation. No salvage value is anticipated. The useful life of the equipment is 7 years. The useful life of the furniture and fixtures is 8 years. The book values of these assets are presented below:Land $100,000 $100,000Building 300,000Less: Accumulated Depr 1,250 298,750Equipment 42,000Less: Accumulated Depr 500 41,500Furniture and Fixtures 19,968Less: Accumulated Depr 208 19,760Net Plant, Property, and Equipment $460,010Unearned RevenueThe balance in the unearned revenue account is due to the sale of gift certificates redeemable for massage therapy.Revenue Recognition The Company recognizes service revenue upon providing services for customers. Sales revenue is recognized upon customer receipt of goods. Revenue for gift certificate sales is recognized at redemption. (Note: all memberships sold during the first month of operations were for one month only).Practice Problem in AccountingThe Health & Fitness Center2Spring, 2012InstructionsUse the following TRANSACTIONS AND ADDITIONAL INFORMATION to complete the General Journal, Ledger, Worksheet and Financial Statements for the second month of operations for theHealth & Fitness Center. Use the Perpetual Inventory method as discussed in class for all sales of merchandise. TRANSACTIONSFeb 1 Purchased a 2-month advertising campaign to be broadcast on local radio stations during the months of Feb.and Mar. Paid $2,200 in advance for this ad campaign. Feb 1 Sold 120, twelve-month memberships to the Fitness Center for $360 each. All membership dues were collected in cash.Feb 2 Purchased office supplies for $300 on an open account from Kelli’s Office Supplies. The Fitness Center has 30 days to pay for the supplies.Feb 3 Purchased on account a total of 150 shirts with an embroidered Fitness Center logo from C & C Creations at a price of $9 per shirt. These shirts are available for resale to customers.Feb 4 Paid wages due on January 31. Feb 5 The owners of the company invested an additional $20,000 into the Fitness Center in exchange for common stock.Feb 6 Purchased concessions for $2,500 on account from Advocare Distributing, Inc. These concessions consist of energy drinks, nutritional supplements, etc., and are available for resale to customers.Feb 7 Provided 40 hours of personal training services to members. Fees are charged at a rate of $35 an hour. The total amount was billed to individual member’s accounts. Feb 9 Purchased Valentines Day flowers for the reception desk for $70 cash.Feb 10 Paid the total amounts due to Kelli’s Office Supplies for the Feb. 2 transaction and C&C Creations for the Feb. 3 transaction.Feb 12 Sold forty shirts to a corporate member, Allen & Associates for $28 each. Collected $500 in cash and the balance is owed to the Fitness Center on account.Feb 15 The concessions stand reported sales of merchandise for $3,550 for the first half of themonth. The concessions that were sold had an original cost of $1,890. All of these transactions were billed directly to each member’s account.3Feb 15 For the first half of February, provided 24 hours of massage therapy at a rate of $75/hour. Billed the individual members’ accounts for services