Question

At the end of 2022, the following information is available for Great Adventures. • Additional interest for five months needs to be accrued on the $32,800, 6% loan obtained on August 1, 2021. Recall that annual interest is paid each July 31. • Assume that $12,800 of the $32,800 loan discussed above is due next year. . By the end of the year, $20,000 in gift cards have been redeemed. The company had sold gift cards of $27,800 during the year and recorded those as Deferred Revenue. • Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The company believes the likelihood of payment occurring is probable, and the estimated amount to be paid is $14,800. • For sales of MU watches, Great Adventures offers a warranty against defect for one year. At the end of the year, the company estimates future warranty costs to be $6,800. Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Prepare the journal entries for transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Journal Entries:

	Date	Account title and explanation	Debit	Credit
1	Dec 31	Interest expense [32,800 x 6% x (5/12)]	$820
		Interest payable		$820
		[To record accrued interest expense]
2	Dec 31	No Journal Entry Required
3	Dec 31	Deferred revenue	$20,000
		Revenue		$20,000
		[To record revenue from gift cards]
4	Dec 31	Lawsuit Expense	$14,800
		Estimated Lawsuit Liability		$14,800
		[To record estimated litigation expenses]
5	Dec 31	Warranty expense	$6,800
		Warranty liability		$6,800
		[To record estimated warranty costs]
6	Dec 31	Revenue	$20,000
		Income summary		$20,000
		[To close revenue accounts]
7	Dec 31	Income summary	$22,420
		Interest expense		$820
		Lawsuit expense		$14,800
		Warranty Expense		$6,800
		[To close expenses accounts]