Question

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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. 1 Purchase a one-year insurance policy for $4,680 ($390 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,900 associated with incorporation. Jul. 4 Purchase office supplies of $1,200 on account. Jul. 7 Pay for advertising of $210 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. 8 Purchase 10 mountain bikes, paying $19,100 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $1,200 from 40 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 $1,550. Jul. 24 Pay $730 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $110 in advance or $160 on the day of the clinic. Jul. 30 Great Adventures receives cash of $7,700 in advance from 70 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $31,000 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 $20,400 cash. Aug. 10 Twenty additional kayakers pay $3,200 ($160 each), in addition to the $7,700 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 $4,080 ($340 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14,500 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, 400 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 $540. Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $40 in salary for each team that competes in the race. His salary will be paid after the race. Dec. 8 The company pays $1,500 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense. Dec. 12 The company purchases racing supplies for $2,200 on account due in 30 days. Supplies include trophies for the top-finishing teams in each category, promotional shirts, snack foods and drinks for participants, and field markers to prepare the racecourse. Dec. 15 The company receives $21,600 cash from a total of forty teams, and the race is held. Dec. 16 The company pays Victor's salary of $1,600.

Answer 1

Great Adventures Journal Enteries Date Particulars 1.7.2021 Cash a/c Dr. To Common Stock (Being Equal no. of stock issued to Tony and Suzie) Debit in $Credit in $ 30000 30000 4680 1.7.2021 Prepaid Insurance a/c Dr. To Cash (Being Insurance paid in cash) 360 per month Trial Balance For the period ending 31.7.2021 Particulars Debit in $ Credit in $ Cash 13830 Prepaid Insurance 4680 Office Supplies 1200 Equipment(Bikes) 19100 Accounts Payable 1200 Common Stock 30000 Service revenue (Racing) 2750 Unearned Kayaking Service 7700 Legal Fees 1900 Advertising Expense Totals 41650 41650 4680 1900 2.7.2021 Legal Fees a/c Dr. To Cash (Being Legal Fees paid in Cash) 1900 940 1200 4.7.2021 Office Supplies a/c Dr. To Accounts Payable (Being Supplies purchased on account) 1200 210 7.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to newspaper) 19100 8.7.2021 Mountain Bikes a/c Dr. To Cash (Being 10 Mountain Bikes purchased for cash) 19100 1200 15.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 1200 1550 22.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 1550 24.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to local radio station) 7700 30.7.2021 Cash a/c Dr. To Unearned Kayaking Service (Being Advance received for Kayaking service) 7700

Journal Enteries Date Particulars 1.8.2021 Cash a/c Dr. To Loan (Being Loan taken from city council) Debit in $ Credit in $ 31000 31000 4.8.2021 20400 Kayaks a/c Dr. To Cash (Kayaks purchased in cash) 20400 3200 7700 10.8.2021 Cash a/c Dr. Deferred revenue a/c Dr. To Service revenue (Clinic) (Being revenue recognized) 10900 11800 17.8.2021 Cash a/c Dr. To Service revenue (Clinic) 11800 12001 24.8.2021 Accounts Payable a/c Dr. To Cash (Being Accounts Payable paid in cash) 1200 4080 1.9.2021 Prepaid rent a/c Dr. To Cash (Being rent paid in cash) 340 per month 4080 145001 21.9.2021 Cash a/c Dr. To Service revenue (Clinic) (Being services performed for cash) 14500 18400 17.10.2021 Cash a/c Dr. To Service revenue (Clinic) (Being services performed for cash) 18400 1500 8.12.2021 Miscellaneous expense a/c Dr. To Cash (Being permit purchased in cash) 1500 22001 12.12.2021 Racing Supplies a/c Dr. To Accounts Payable (Being Racing supplies purchased on account) 2200 21600 15.12.2021 Cash a/c Dr. To Service revenue (Racing) (Being services performed for cash) 21600 1600 16.12.2021 Salary expense a/c Dr. To Cash (Being salary paid to Victor in cash) 1600 4100 31.12.2021 Dividend a/c Dr. To Cash (Being dividend paid to Tony and Suzie) 4100 31.12.2021 No Entry

Adjusting Enteries Date Particulars 31.12.2021 Depreciation a/c Dr. To Accumulated Depreciation (Being depreciation charged to asset) Debit in $ Credit in $ 7100 7100 31.12.2021 Insurance expense a/c Dr. 2340 To Prepaid Insurance (Being Insurance expense charged to Prepaid insurance) 2340 31.12.2021 Rent expense a/c Dr. 1360 To Prepaid Rent (Being rent expense charged to Prepaid Rent) 340 x 4 = 1360 1360 8601 1 860 31.12.2021 Office Supplies expense a/c Dr. To Office Supplies (Being Supplies expense charged to Office Supplies.) 1200 - 340 31.12.2021 Interest expense a/c Dr. To Interest payable 31000 * 6% * 5/12 (Being Interest expense accrued) 775 775 2080 31.12.2021 Racing Supplies expense a/c Dr. 2080 To Racing Supplies (Being racing supplies expense charged to racing supplies) 2200 - 120 31.12.2021 Income tax expense a/c Dr. 13600 To Income tax payable (Being income tax accrued) 13600 Closing Enteries Date Particulars 31.12.2021 Income Summary a/c Dr. To Advertising expense To Legal fees expense To Miscellaneous expense To Salary expense To Depreciation To Insurance expense To Rent expense To Office Supplies expense To Racing Supplies expense To Interest expense To Income tax expense (Being expenses closed to Income summary) Debit in $ Credit in $ 34055 940 1900 1500 1600 7100 2340 1360 860 2080 775 13600 77200 2750 31.12.2021 Service revenue (Clinic) a/c Dr. Service revenue (Racing) a/c Dr. To Income Summary (Being Revenues closed to Income summary) 79950 45895 31.12.2021 Income Summary a/c Dr. To Retained Earnings |(Being profit transferred to retained earnings) 45895 4100 31.12.2021 Retained Earnings a/c Dr. To Dividends (Being dividends charge to Retained Earnings) 4100

Adjusted Trial Balance As at 31.12.2021 Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Particulars Assets Cash 81450 2340 2720 340 120 19100 81450 2340 2720 340 120 19100 7100 7100 20400 20400 2200 775 13600 2200 775 13600 31000 31000 30000 30000 41795 Prepaid insurance Prepaid rent Supplies (Office) Racing Supplies Equipment(Bikes) Accumulated Depreciation Kayaks Liabilities Accounts payable Interest payable Income tax payable Deferred revenue Loan Equity Common stock Retained Earnings Dividend Revenue Service revenue (Clinic) Service revenue (Racing) Expenses Advertising expense Legal fees expense Miscellaneous expense Salary expense Depreciation Insurance expense Rent expense Office Supplies expense Racing Supplies expense Interest expense Income tax expense Total 4100 77200 2750 940 1900 1500 1600 7100 2340 1360 860 2080 775 13600 164625 164625 126470 126470 Retaned Earnings Dividends 4100 Bal Income Summary Bal. 41795 45895 45895 45895

77200 2750 79950 Statement of Income For the period ending 31.12.2021 Service revenue (Clinic) Service revenue (Racing) Totals Less: Advertising expense Legal fees expense Miscellaneous expense Salary expense Depreciation Insurance expense Rent expense Office Supplies expense Racing Supplies expense Interest expense Income tax expense Net Income 940 1900 1500 1600 7100 2340 1360 860 2080 775 13600 34055 45895 Statement of Retained Earnings Net Income Less:Dividends 31.12.2021 45895 -4100 41795 Statement of Retained Earnings For the period ending 31.12.2021 1.8.2021 Add:Net Income Less:Dividends Common Retained Stock Earnings 30000 45895 -4100 30000 41795 Total Equity 30000 45895 -4100 71795

Amounts in $ Amounts in $ Balance sheet As at 31.12.2021 Assets Current Assets Cash Prepaid insurance Prepaid rent Supplies (Office) Racing Supplies Amounts in $ Amounts in $ Liabilities Current Liabilities 81450 Accounts payable 2340 Interest payable 2720 Income tax payable 340 120 86970 Non Current Liabilities Loan 2200 775 13600 16575 31000 Non Current Assets Equipment(Bikes) Kayaks Accumulated Depreciation Total Assets 19100 20400 -7100 Shareholders Equity Common stock 30000 32400 Retained Earnings 41795 119370 Total Liabilities & Shareholders Eq. 71795 119370