Question

Great Adventures Problem AP3-1 (GL) 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 22,000 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 $11,000 of common stock to Susie. Jul. 1 Sell $11,000 of common stock to Tony. 1 Purchase a one-year Insurance policy for $5,040 ($420 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,600 associated with incorporation. Jul. 4 Purchase office supplies of $1,300 on account. Jul. 7 Pay for advertising of $370 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $70 on the day of the clinic. Jul. Purchase 10 mountain bikes, paying $12,700 cash. Jul. 15 on the day of the clinic, Great Adventures receives cash of $4,900 from 70 bikers. Tony conducts the mountain biking clinic. Jul. 22 Because of the success of the first moutain biking elinie, Tony holds another mountain biking elinie and the company receives $5,450. Jul. 24 Pay 5930 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 elinie Jul. 30 Great Adventures receives cash of $8,400 in advance from 70 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $49,000 lov-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 6t annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $22.400 cash. Aug. 10 Twenty additional kayakers pay $3,400 ($170 each). In addition to the $8,400 that was paid in advance on July 30, on the day of the clinic. Tony conducts the first kayak elinie. Aug. 17 Tony conducts a second kayak elinie, and the company receives $12,100 cash. Aug. 24 Office supplies of $1,300 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 Tomy conducts a rock-elimbing elinie. The company receives $15, 100 cash. Oct. 17 Tony conducts an orienteering clinic. Participants practice how to understand a topographical map, read an

Answer 1

Great Adventures, Inc. Journal Entries: Date Transaction Debit Credit 01-Jul 11000 Cash common stock 11000 01-Jul 11000 Cash common stock 11000 01-Jul Prepaid insurance 50401 | cash 5040 02-Jul 1600 Leagl expenses cash 1600 04-Jul 1300 Office supplies accounts payable 1300 07-Jul 370 Advertising expenses cash 370 08-Jul 12700 Equipment(Mountain bikes) cash 12700 15-Jul 4900 Cash service revenue 4900 22-Jul 54501 Cash service revenue 5450 24-Jul 930 Advertising expenses cash 930

30-Jul Cash 8400 Deferred revenue 8400 August 49,000 1 Cash Notes Payable (Obtain loan from city council 49,000 22,400 4 Equipment(Kayaks) Cash (Pay cash for kayaks) 22,400 8,400 3,400 11,800 10 Deferred Revenue Cash Sevice Revenue(Clinc) (Receive cash and hold kayak clinic) (you can post two separate entries; I have posted cumulative) 17 Cash Sevice Revenue(Clinc) (Receive cash and hold kayak clinic) 12,100 12,100 1,300 24 Accounts Payable Cash (Pay cash on account) 1,300 September 3,120 1 Prepaid Rent Cash (Pay cash for one-year rental policy) 3,120 15.100 21 Cash Service Revenue(Clinic) (Receive cash for rock climbing clinic) 15,100 October 18,600 17 Cash Service Revenue(Clinic) (Receive cash for orienteering clinic) 18,600 December 1,400 8 Misc Expense Cash (Pay cash for race permit) 1.400 2.100 12 Supplies(Racing) Accounts Payable (Purchase racing supplies on account) 2,100 22,400 15 Cash Service Revenue(Race) (Receive cash for adventure race) 22.400 1,600 16 Salaries Expense Cash (Pay cash for salary) 1,600

4.300 31 Dividends Cash (Pay cash for dividend) 4 300 31 No entry Requirement 2 December 7,020 Adjusting Entries 31 Depreciation Expense Accumulated Depreciation (Adjust accurnulated depreciation) 7,020 2,520 31] Insurance Expense($420 * 6 months) Prepaid Insurance (Adjust prepaid insurance) 2,5201 1,040 31 | Rent Expense($260 * 4months) Prepaid Rent (Adjust prepaid rent) 1,040 1,050 31] Supplies Expense(Office)(1300-250) Supplies(Office) (Adjust office supplies) 1.050 1,225 31] Interest Expense 49000*6%85/12) Interest Payable (Adjust interest payable) 1,800 31] Supplies Expense Racing)(2100-300) Supplies(Racing) (Adjust racing supplies) 1,800 15,000 31Income Tax Expense Income Tax Payable (Adjust income tax payable) 15,000 December Requirement 6 Closing Entries 31 Service Revenue(Clinic) Service Revenue (Racing) Income Summary 67,950 22,400 90,350 35.555 31 Income Summary Advertising Expense Depreciation Expense Income Tax Expense Insurance Expense Interest Expense Legal Fees Expense Miscellaneous Expense Rent Expense Salaries Expense Supplies Expense (Office) Supplies Expense (Racing) 1,300 7,020 15,000 2,520 1.225 1,600 1,400 1,040 1,600 pense (Office) 1.050 1,800 31 54,795 Income Summary Retained earnings 54,795 4,300 31 Retained Earnings | Dividends 4,300

Great Adventures, Inc, Adjusted Trial Balance December 31, 2018 Accounts Debit Credit Cash $ 106,590 Prepaid Insurance $ 2,520 Prepaid Rent 2,080 Supplies (Office) 250 Supplies (Racing) 300 Equipment (Bikes) $ 12,700 Equipment (Kayaks) $ 22,400 Accumulated Depreciation $ 7,020 Accounts Payable 2,100 Income Tax Payable $ 15,000 Interest Payable $ 1,225 Notes Payable $ 49,000 Deferred revenue 1 $ - Common Stock $ 22,000 Dividends $ 4,300 Service Revenue (Clinic) $ 67,950 Service Revenue (Racing) $ 22,400 Advertising Expense $ 1,300 Depreciation Expense 7,020 Income Tax Expense $ 15,000 Insurance Expense $ 2,520 Interest Expense $ 1,225 Legal Fees Expense | $ 1,600 Miscellaneous Expense $ 1,400 Rent Expense $ 1,040 Salaries Expense $ 1,600 Supplies Expense (Office) $ 1,050 Supplies Expense (Racing) $ 1,800 Totals $ 186,695 | $ 186,695

Post closing trial balance Cash $ 106,590 $ Prepaid Insurance $ 2,520 $ Prepaid Rent $ 2,080 $ Supplies (Office) $ 250$ Supplies (Racing) $ 300 $ Equipment (Bikes) $ 12,700 $ Equipment (Kayaks) $ 22,400 $ Accumulated Depreciation $ - $ Accounts Payable $ Income Tax Payable $ Interest Payable - $ Notes Payable - $ Deferred revenue - $ Common Stock - $ retained earnings 7,020 2,100 15,000 1,225 49,000 - 22,000 50,495 total $ 146,840 $ 146,840

Great Adventures, Inc. Income Statement For the period ended December 31, 2018 67,950 22,400 | $ 90,350 Revenues: Service Revenue (Clinic) Service Revenue (Racing) Total Revenues Expenses: Advertising Expense Depreciation Expense Income Tax Expense Insurance Expense Interest Expense Legal Fees Expense Miscellaneous Expense Rent Expense Salaries Expense Supplies Expense (Office) Supplies Expense (Racing) Total Expenses Net Income 1,300 7,020 15,000 2,520 1,225 1,600 1,400 1,040 1,600 1,050 1,800 35,555 54,795 $

tatement , Great Adventures, Inc. Statement of Stockholders's Equity For the period ended December 31, 2018 Common Stock Retained Earnings Total Stockholder's Equity $ - $ 22,000 Balance at July 1 Issuance of common stock Add: Net income for 2018 Less: Dividends Balance at December 31 54,795 (4,300) 50,495 22,000 54,795 (4,300) 72,495 $ $ - $ $ 22,000 $ - $

$ Assets Cash Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Total Current Assets Great Adventures, Inc. Balance Sheet December 31, 2018 Liabilities 106,590 Accounts Payable 2,520 Interest Payable 2,080 Income Tax Payable 250 Total Current Liabilities 300 Notes Payable 111,740 Stockholders' Equity 12,700 Common Stock 22,400 Retained Earnings (7,020) Total Stockholder's Equity Total Liabilities and 139,820 | Stockholder's Equity | $ 2,100 1,225 15,000 18,325 49,000 $ Equipment (Bikes) Equipment (Kayaks) Accum. Depr. 22,000 50,495 72,495 Total Assets $ 139,820 |

Retained earnings Beg bal dividends closing balance 01-Jul 01-Jul Common stock 11000 11000 11000 22000 4,300 54,795 Closing/Income summary 50,495 01-Jul 01-Dec Prepaid insurance 5040 2,520 5040 2,520 Service reveueſclinic) 15-Jull 4900 4900 22-Jul 545010350 10-Aug 11,800 22150 17-Aug 12,100 34250 21-Sep L 15,100 49350 17 Dec 18,600 67950 Closing 67.950 Prepaid rent 3,120 01-Sep 01-Dec 31201 2,080 1,040 Cash 11000 11000 11000 22000 504016960 160015360 370 14990 12700 2290 49001 7190 5450 12640 9201 11710 84001 20110 49,000 69,110 22,400 46,710 3,400 50.110 12,100 62,210 1300 60,910 3,120 57,790 15,100 72,890 18,600 91,490 1,400 90,090 22,400 112,490 1,600 110,890 4,300 106,590 01-Jul 01-Jul 01-Jull 02-Jul 07-Jul 08-Jul 15-Jull 22-Jul 24. 30 Jull 01-Aug 04-Jan 10-Jan 17-Jan 24-Jan 01-Sep 21-Jan 01-Oct 01-Dec 15-Jan 16-Jan 31-Jan Supplies[office) 1300 1,050 04-Jul 01-Dec Date 1300 250 Deferred revenue Debit Credit Balance 30-Jul 8400 8400 10-Aug 8,400 0 01-Dec Supplies racing) 2,100 1,800 2,100 300 Accumulated dep $ 7,020 31-Dec 7,020 Equipments(Bikes 12700 08-Jul 2700 31-Dec Income tax payable $ 15,000 15,000 Equipments/Kayaks) 22,400 01-Aug Advertising expense 370 1 930 1300 07-Jul 24-Jul Closing 22.400 370 1300 31-Dec Interest payable $ 1,225 1,225 16-Dec Salaries expense 1,600 1600 31-Dec Closing Depriciation expense 7,020 17,020 170200 Closing Notas pavable $ 49,000 0 1-Augl 49,000 supplies expense(office) 1,050 10500 31-Dec 31-Dec Closing Income tax expense 15,000 15,000 150000 1,050 Closing 04.Jul 24-Aug 12-Dec Accounts payable 1300 1,300 2,100 1300 0 2,100 supplies expense(racing) 1,800 18000 31-Dec | 1800 31-Dec Closing | Insurance expense 2,520 2,520 25200 Closing Legal fees expense 1600 1600 Service reveue(racing! 15-Decl 22,400 02-Jul 22,400 0 interest expense 1,225 12251 1600 31-Dec Closing Closing 1,225 0 Closing 08-Dec Miscellaneous exp 1,400 1400 closing closing 31-Dec Income surnmary 90,350 35,555 1 54,795 90,350 54,795 Closing Rent exp. 31-Dec 1,040 Retained earnings opening bal 31-Dec 54,795 31-Dec $ 4,300 Closing 1040 | 54,795 50,495