Question

Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering dinics 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 34,000 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 $17,000 of common stock to Suzie. Jul. 1 Sell $17,000 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 $1,700 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 $50 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $15,000 cash. Jul 15 on the day of the clinic, Great Adventures receives cash of $2,000 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 $2,400. Jul. 24 Pay $780 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $150 in advance or $200 on the day of the clinic. Jul. 30 Great Adventures receives cash of $10,500 in advance from 70 kayakers for the upcoming kayak clinic. Aug 1 Great Adventures obtains a $35,000 low-interest loan 35,800 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 $23, 480 cash. Aug. 10 Twenty additional kayakers pay $4,080 ($200 each), in addition to the $19,500 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 $12,400 cash. Aug, 24 Office Supplies of $1,700 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 $4,689 ($390 per month) in advance, Sep: Tony conducts a rock-climbing clinic. The company receives $14.700 cash,

Answer 1

63,900 23,600 87,500 Great Adventures Inc. Income Statement For period ending Dec 31 Revenues Service revenue (Clinic) Service revenue (Racing) Total Revenues Expenses: Advertising expense Legal fees expense Misc expense Salary expense Depreciation expense Insurance expense Rent expense Supplies (Office) expense Supplies (Racing) expense Interest expense Total Expenses Net Income before income taxes Income taxes Net Income 990 1,100 1,700 1,600 9,000 1,920 1,560 1,440 2,340 875 22,525 64,975 14,000 50,975

Great Adventures Inc. Statement of Stockholders Equity For period ending Dec 31 Common Stock Retained Earnings Total Equity 34,000 Beginning balance Issue of common stock Net Income Dividends Ending Balance 50,975 (4,400) 46,575 34,000 50,975 (4,400) 80,575 34,000

Great Adventures Inc. Balance Sheet As of Dec 31 Assets Current Assets: Cash Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Total Current Assets Liabilities Current Liabilities: 98,090 Accounts Payable 1,920 Interest Payable 3,120 Income taxes payable 260 Total Current Liabiltiies 260 103,650 Non-Current Liabilities: Notes Payable Total Liabilities 2,600 875 14,000 17,475 35,000 52,475 Long-term Assets: Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Total Long-term Assets Stockholders Equity: 15,000 Common stock 23,400 Retained Earnings (9,000) 29,400 Total Stockholders Equity 34,000 46,575 80,575 Total Assets 133,050 Total Liabilities & Stockholders Equity 133,050

Great Adventures Inc. Journal entries No. Date Accounts 1 1-Jul Cash Common Stock Credit Debit 17,000 17,000 17,000 1-Jul Cash Common Stock 17,000 3 3,840 1-Jul Prepaid Insurance Cash 3,840 4 1,100 2-Jul Legal fees expense Cash 1,100 1,700 4-Jul Supplies (Office) Accounts Payable 1,700 7-Jul Advertising expense Cash 210 210 7 15,000 8-Jul Equipment (Bikes) Cash 15,000 8 2,000 15-Jul Cash Service revenue (Clinic) 2,000 9 2,400 22-Jul Cash Service revenue (Clinic) 2,400 10 780 24-Jul Advertising expense Cash 780 11 10,500 30-Jul Cash Deferred Revenue 10,500 35,000 121-Aug Cash Notes Payable 35,000 13 23,400 4-Aug Equipment (Kayaks) Cash 23,400 14 10-Aug Cash Deferred Revenue Service revenue (Clinic) 4,000 10,500 14,500 15 12,400 17-Aug Cash Service revenue (Clinic) 12,400 16 1,700 24-Aug Accounts Payable Cash 1,700 17 1-Sep Prepaid Rent 4,680 Cash 4,680 18 14,700 21-Sep Cash Service revenue (Clinic) 14,700 19 17,900 17-Oct Cash Service revenue (Clinic) 17,900 20 1-Dec No entry 21 5-Dec No entry 22 1,700 8-Dec Misc expense Cash 1,700 23 2,600 12-Dec Supplies (Racing) Accounts Payable 2,600 24 23,600 15-Dec Cash Service revenue (Racing) 23,600 25 16-Dec Salary expense 1,600 Cash 1,600 26 4,400 31-Dec Dividends Cash 4,400 27 31-Dec No entry

Credit Calculation Adjusting entries No. Date Accounts 28 31-Dec Depreciation expense Accumulated Depreciation Debit 9,000 ACCU 9,000 29 1,920 =3,840/12*6 31-Dec Insurance expense Prepaid Insurance 1,920 30 1,560 -4,680/12*4 31-Dec Rent expense Prepaid Rent 1,560 31 31-Dec Supplies (Office) expense Supplies (Office) 1,440 =1,700-260 1,440 32 875 =35,000*6%*5/12 31-Dec Interest expense Interest Payable 875 33 2,340 =2,600-260 31-Dec Supplies (Racing) expense Supplies (Racing) 2,340 34 14,000 31-Dec Income tax expense Income tax payable 14,000

Credit Closing entries No. Date Accounts 35 31-Dec Service revenue (Clinic) Service revenue (Racing) Retained Earnings Debit 63,900 23,600 87,500 36 36,525 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 1,100 1,700 1,600 9,000 1,920 1,560 1,440 2,340 875 14,000 37 4,400 31-Dec Retained Earnings Dividends 4,400

Credit Credit Date Credit Date Credit Date Debit Date Prepaid Insurance 1-Jul 3,840 31-Dec Debit Date Prepaid Rent 4,680 31-Dec Debit Date Supplies (Office) 1,700 31-Dec 1,920 1-Sep 1,560 4-Jul 1,440 Great Adventures Inc. T Accounts Date Debit Date Cash 1.Jul 17,000 1-Jul 1-Jul 17,000 2-Jul 15-Jul 2,000 7-Jul 22-Jul 2,400 8-Jul 30-Jul 10,500 24-Jul 1-Aug 35,000 4-Aug 10-Aug 4,000 24-Aug 17-Aug 12,400 1-Sep 21-Sep 14,700 8-Dec 17-Oct 17,900 16-Dec 15-Dec 23,600 31-Dec 3,840 1,100 210 15,000 780 23,400 1,700 4,680 1,700 1,600 4,400 Bal. Bal. 1,920 Bal. Bal. 98,090 Supplies (Racing) 2,600 31-Dec Equipment (Bikes) 15,000 3,120 Equipment (Kayaks) 23,400 260 Accum. Depreciation 31-Dec 12-Dec 2,340 8 -Jul 4-Aug 9,000 Bal. Bal. Bal. 9,000 260 Accounts Payable 1,700 4-Jul 12-Dec 15,000 Deferred Revenue 10,500 30-Jul 23,400 Interest Payable 31-Dec Bal. Income taxes payable 31-Dec 24-Aug 1 0-Aug 10,500 875 14,000 1,700 2,600 2,600 Bal. 875 14,000 Bal. Notes Payable 1-Aug Bal. Dividends 4,400 31-Dec Common Stock 1-Jul 1-Jul Bal. Retained Earnings 36,525 31-Dec 4,400 35,000 31-Dec 87,500 17,000 17,000 31-Dec 31-Dec 4,400 35,000 34,000 Bal. 46,575 Bal. Service revenue (Racing) 16-Dec Bal. Legal fees expense 1,100 23,600 Advertising expense 210 780 7-Jul 24-Jul 2-Jul Bal. Service revenue (Clinic) 15-Jul 22-Jul 10-Aug 17-Aug 21-Sep 31-Dec 63,900 17-Oct 2,000 2,400 14,500 12,400 14,700 17,900 31-Dec 23,600 31-Dec 990 31-Dec 1,100 Bal. Bal. Bal. Misc expense 1,700 31-Dec Bal. Salary expense 1,600 31-Dec 8-Dec 16-Dec Depreciation expense 31-Dec 9,000 31-Dec 31-Dec Insurance expense 1,920 31-Dec 1,700 1,600 9,000 1,920 Bal. Bal. Bal. Bal. Supplies (Office) expense 31-Dec 1,440 31-Dec Rent expense 1,560 31-Dec 31-Dec .. Interest expense 875 31-Dec Supplies (Racing) expense 31-Dec 2,340 31-Dec 31-Dec 1,560 1,440 2,340 875 Bal. Bal. Bal. 31-Dec Income tax expense 14,000 31-Dec 14,000 Bal.

Unadjusted TB As of Dec Debit Credit 98,090 3,840 4,680 1,700 2,600 15,000 23,400 Adjusted TB As of Dec Debit Credit 98,090 1,920 3,120 260 260 15,000 23,400 9,000 2,600 Post closing TB As of Dec Debit Credit 98,090 1,920 3,120 260 260 15,000 23,400 9,000 2,600 2,600 Great Adventures Inc. Trial Balance Accounts Cash Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Accounts Payable Deferred Revenue Interest Payable Income taxes payable Notes Payable Common stock Retained Earnings Dividends Service revenue (Clinic) Service revenue (Racing) 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 Totals 875 14,000 35,000 34,000 35,000 34,000 875 14,000 35,000 34,000 46,575 4,400 4,400 63,900 23,600 63,900 23,600 990 1,100 1,700 1,600 990 1,100 1,700 1,600 9,000 1,920 1,560 1,440 2,340 875 14,000 182,975 159,100 159,100 182,975 142,050 142,050