Question

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 30,000 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. The following transactions occur from July 1 through December 31. Jul. 1 Sell $15,000 of common stock to Suzie. Jul. 1 Sell $15,000 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for 54,800 (5400 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,500 associated with incorporation. Jul. 4 Purchase office supplies of $1,200 on account. Jul. 7 Pay for advertising of $230 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $30 on the day of the clinic. Jul. & Purchase 10 mountain bikes, paying $12,100 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $1,800 from 60 bikers. Tony conducts the mountain biking clinic. Jul. 22 Because of the success of the first mountain biking clinic, Tony holds another mountain biking clinic and the company receives $2,150. Jul. 24 Pay $760 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $120 in advance or $170 on the day of the clinic. Jul. 30 Great Adventures receives cash of $7,200 in advance from 60 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $46,000 low-interest loan for the company from the city council, which has recently passed an initiative encouraging business development related to outdoor activities. The loan is due in three years, and 6% annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $22,100 cash. Aug. 10 Twenty additional kayakers pay $3,480 ($170 each), in addition to the $7,200 that was paid in advance on July 30, on the day of the clinic. Tony conducts the first kayak clinic. Aug. 17 Tony conducts a second kayak clinic, and the company receives $11,800 cash. Aug. 24 Office supplies of $1,200 purchased on July 4 are paid in full. Sep. 1 To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed for one year, paying $3,120 (5260 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14,200 cash. Oct. 17 Tony conducts an orienteering clinic. Participants practice how to understand a topographical map, read an altimeter, use a compass, and orient through heavily wooded areas. The company receives $18,200 cash. Dec. 1 Tony decides to hold the company's first adventure race on December 15. Four person teams will race from checkpoint to checkpoint using a combination of mountain biking, kayaking, orienteering, trail running and rock-climbing skills. The first team in each category to complete all checkpoints in order wins. The entry fee for each team is $580. Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid 570 in salary for each team that competes in the race. His salary will be paid after the race. Dec. The company pays $1,400 to purchase a permit from a state park where the race will be held. The amount is recorded as a iscellaneous expense. Dec. 12 The company purchases racing supplies for $2,900 on account due in 30 days. Supplies include trophies for the top-finishing teams in each category, promotional shirts, Shack foods and drinks for participants, and field markers to prepare the Facecourse. Dec. 15 The company receives $23,200 cash from a total of forty teens, and the race is held. Dec. 16 The company pays Victor's salary of $2,800. Dec. 31 The company pays a dividend of $4,500 (52,250 to Tony and $2,250 to Surie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,900. Tony surprises Suzie by proposing that they get sarried. Sutie accepts and they get married! The following information relates to year-end adjusting entries as of December 31, 2021 Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $6.840 b. Six months of the one-year insurance policy purchased on July 1 has expired. Four months of the one-year rental agreement purchased on September has expired d. Of the $1200 of office supplies purchased on July 4, 5400 remains e Interest expense on the 546,000 loan obtained from the city council on August 1 should be recorded. of the 2,900 of racing supplies purchased on December 12. $130 remains g Suzie calculates that the company owes $14100 in income taxes

Answer 1

Credit Calculation Great Adventures Inc. Journal entries No. Date Accounts 14 10-Aug Cash Deferred Revenue Service revenue (Clinic) Debit 3,400 7,200 10,600 Credit Adjusting entries No. Date Accounts 28 31-Dec Depreciation expense Accumulated Depreciation Debit 6,840 Calculation Not 6,480 6,840 Credit Calculation Closing entries No. Date Accounts 35 31-Dec Service revenue (Clinic) Service revenue (Racing) Retained Earnings Debit 58,750 23,200 81,950 36 35,790 31-Dec Retained Earnings Advertising expense Legal fees expense Misc expense Salary expense Depreciation expense Insurance expense Rent expense Supplies (Office) expense Supplies (Racing) expense Interest expense Income tax expense 990 1,500 1,400 2,800 6,840 2,400 1,040 800 2,770 1,150 14,100

Credit Date Credit Date Date Debit Date Prepaid Insurance 4,800 31-Dec Credit Debit Date Credit Prepaid Rent 3,120 31-Dec 1,040 Date Debit Date Supplies (Office) 1,200 31-Dec oscurelles con 1-Jul 2,400 1-Sep 4-Jul 800 Great Adventures Inc. T Accounts Date Debit Date Cash 1-Jul 15,000 1-Jul 1-Jul 15,000 2-Jul 15-Jul 1,800 7-Jul 22-Jul 2,150 8-Jul 30-Jul 7,200 24-Jul 1-Aug 46,000 4-Aug 10-Aug 3,400 24-Aug 17-Aug 11,800 1-Sep 21-Sep 14,200 8-Dec 17-Oct 18,200 16-Dec 15-Dec 23,200 31-Dec 4,800 1,500 230 12,100 760 22,100 1,200 3,120 1,400 2,800 4,500 Bal. Bal. 2,400 Bal. Bal. 103,440 Supplies (Racing) 2,900 31-Dec Equipment (Bikes) 12,100 2,080 Equipment (Kayaks) 22,100 400 Accum. Depreciation 31-Dec 12-Dec 2,770 8 -Jul 4-Aug 6,840 Bal. Bal. Bal. 6,840 12,100 Deferred Revenue 7,200 30-Jul Accounts Payable 1,200 4-Jul | 12-Dec 22,100 Interest Payable 31-Dec Bal. Income taxes payable 31-Dec 24-Aug 10-Aug 7,200 1,150 14,100 1,200 2,900 2,900 Bal. 1,150 14,100 Bal. Notes Payable 1-Aug Bal. Dividends 4,500 31-Dec Common Stock 1-Jul 1-Jul Bal. Retained Earnings 35,790 31-Dec 4,500 46,000 31-Dec 81,950 15,000 15,000 31-Dec 31-Dec 4,500 46,000 Bal. 30,000 Bal. Bal. 41,660 Service revenue (Racing) 16-Dec Legal fees expense 1,500 23,200 Advertising expense 230 760 7-Jul 24-Jul 2-Jul Bal. Service revenue (Clinic) 15-Jul 22-Jul 10-Aug 17-Aug 21-Sep 31-Dec 58,750 17-Oct 1,800 2,150 10,600 11,800 14,200 18,200 31-Dec 23,200 31-Dec 990 31-Dec 1,500 Bal. Bal. Bal. Misc expense 1,400 31-Dec Bal. Salary expense 2,800 31-Dec 8-Dec 16-Dec Depreciation expense 31-Dec 6,840 31-Dec 31-Dec Insurance expense 2,400 31-Dec 1,400 2,800 6,840 2,400 Bal. Bal. Bal. Supplies (Office) expense 31-Dec 800 31-Dec Rent expense 1,040 31-Dec Bal. Supplies (Racing) expense 31-Dec 2,770 31-Dec 31-Dec 31-Dec Interest expense 1,150 31-Dec 1,040 800 2,770 1,150 Bal. Bal. 31-Dec Income tax expense 14,100 31-Dec 14,100 Bal.