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 39,000 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 $19,500 of common stock to Suzie. Jul. 1 Sell $19,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $3,840 ($320 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,100 associated with incorporation. Jul. 4 Purchase office supplies of $1,900 on account. Jul. 7 Pay for advertising of $250 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $40 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $13,700 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $2,400 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 $2,800. Jul. 24 Pay $650 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $140 in advance or $190 on the day of the clinic. Jul. 30 Great Adventures receives cash of $9,800 in advance from 70 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $41,000 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 68 annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $15,600 cash. Aug. 10 Twenty additional kayakers pay $3,800 ($190 each), in addition to the $9,800 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 $11,300 cash. Aug. 24 office supplies of $1,900 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 $4,440 ($370 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $13,500 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 $19.900 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 $60 in salary for each team that competes in the race. His salary will be paid after the race. Dec. The company pays $1,800 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 $2,800 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 $23, 200 cash from a total of forty teams, and the race is held. Dec. 16 The company pays Victor's salary of $2,400. Dec. 31 The company pays a dividend of $4,000 ($2,000 to Tony and $2,000 to Suzie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,100. Tony surprises Suzie by proposing that they get married. Suzie accepts and they get married!

Answer 1

3.

Cash
Beg. bal.	34,460	Aug 4	15,600
Aug 1	41,000	Aug 24	1,900
Aug 10	3,800	Sep 1	4,440
Aug 17	11,300	Dec 8	1,800
Sep 21	13,500	Dec 16	2,400
Oct 17	19,900	Dec 31	4,000
Dec 15	23,200
End bal.	117,020
Prepaid Insurance
Beg. bal.	3,840	Adj. b	1,920
End. bal.	1,920
Prepaid Rent
Beg. bal.	0	Adj. c	1,480
Sep 1	4,440
End. bal.	2,960
Supplies ( Office )
Beg. bal.	1,900	Adj. d	1,620
End. bal.	280
Supplies ( Racing )
Beg. bal.	0	Adj. f	2,550
Dec 12	2,800
End. bal.	250
Equipment ( Bikes )
Beg. bal.	13,700
End. bal.	13,700
Equipment ( Kayaks )
Beg. bal.	0
Aug 4	15,600
End. bal.	15,600
Accumulated Depreciation
		Beg. bal.	0
		Adj. a	8,000
		End. bal.	8,000
Accounts Payable
Aug 24	1,900	Beg. bal.	1,900
		Dec 12	2,800
		End. bal.	2,800
Deferred Revenue
Aug 10	9,800	Beg. bal.	9,800
		End. bal.	0
Interest Payable
		Beg. bal.	0
		Adj. e	1,025
		End. bal.	1,025
Income Tax Payable
		Beg. bal.	0
		Adj. g	13,100
		End. bal.	13,100
Notes Payable
		Beg. bal.	0
		Aug 1	41,000
		End. bal.	41,000
Common Stock
		Beg. bal.	39,000
		End. bal.	39,000
Dividends
Beg. bal.	0
Dec 31	4,000
End. bal.	4,000
Service Revenue ( Clinic )
		Beg. bal.	5,200
		Aug 10	13,600
		Aug 17	11,300
		Sep 21	13,500
		Oct 17	19,900
		End. bal.	63,500
Service Revenue ( Racing )
		Beg. bal.	0
		Dec 15	23,200
		End. bal.	23,200
Advertising Expense
Beg. bal.	900
End. bal.	900
Legal Fees Expense
Beg. bal.	1,100
End. bal.	1,100
Miscellaneous Expense
Beg. bal.	0
Dec 8	1,800
End. bal.	1,800
Salaries Expense
Beg. bal.	0
Dec 16	2,400
End. bal.	2,400
Depreciation Expense
Beg. bal.	0
Dec 31	8,000
End. bal.	8,000
Insurance Expense
Beg. bal.	0
Dec 31	1,920
End. bal.	1,920
Rent Expense
Beg. bal.	0
Dec 31	1,480
End. bal.	1,480
Supplies Expense ( Office )
Beg. bal.	0
Dec 31	1,620
End. bal.	1,620
Supplies Expense ( Racing )
Beg. bal.	0
Dec 31	2,550
End. bal.	2,550
Interest Expense
Beg. bal.	0
Dec 31	1,025
End. bal.	1,025
Income Tax Expense
Beg. bal.	0
Dec 31	13,100
End. bal.	13,100

5.

Great Adventures Statement of Stockholders Equity For the period ended December 31, 2021
	Common Stock	Retained Earnings	Total Stockholders Equity
Balance at July 1	$ 0	$ 0	$ 0
Common stock issued	39,000		39,000
Net Income		50,805	50,805
Dividends		(4,000)	(4,000)
Balance at December 31	$ 39,000	$ 46,805	$ 85,805

6.

Date	General Journal	Debit	Credit
		$	$
Dec 31, 2021	Revenues: Clinic	$ 63,500
	Revenues: Racing	23,200
	Retained Earnings		86,700
	Closing of revenue accounts
Dec 31, 2021	Retained Earnings	35,895
	Salaries Expense		2,400
	Racing Supplies Expense		2,550
	Office Supplies Expense		1,620
	Advertising Expense		900
	Legal Fees Expense		1,100
	Insurance Expense		1,920
	Rent Expense		1,480
	Depreciation Expense		8,000
	Miscellaneous Expense		1,800
	Interest Expense		1,025
	Income Tax Expense		13,100
	Closing of expense accounts
Dec 31, 2021	Retained Earnings	4,000
	Dividends		4,000
	Closing of dividends