Question

At the end of 2022, the following information is available for Great Adventures.

• Additional interest for five months needs to be accrued on the $30,000, 6% loan obtained on August 1, 2021. Recall that annual interest is paid each July 31.
• Assume that $10,000 of the $30,000 loan discussed above is due next year.
• By the end of the year, $20,000 in gift cards have been redeemed. The company had sold gift cards of $25,000 during the year and recorded those as Deferred Revenue.
• Great Adventures is a defendant in litigation involving a biking accident during one of its adventure races. The company believes the likelihood of payment occurring is probable, and the estimated amount to be paid is $12,000.
• For sales of MU watches, Great Adventures offers a warranty against defect for one year. At the end of the year, the company estimates future warranty costs to be $4,000.

1. Prepare the journal entries for transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

-Record the accrued interest on note

- Record the reclassified portion of long-term debt as current

-Record the redeemed of gift cards

- Record the loss of contingent liability

- Record the estimated future warranty costs

- Record entry to close the revenue accounts

- Record entry to close the expense accounts

Account Title Credit $ Debit 89,070 50,000 2,400 7,000 900 62,000 Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Prepaid Insurance Equipment Accumulated Depreciation Accounts Payable Income Tax Payable Deferred Revenue Notes Payable (Long-term) Common Stock Retained Earnings Service Revenue Sales Revenue Sales Discounts Interest Revenue Cost of Goods Sold Depreciation Expense Supplies Expense Salaries Expense Bad Debt Expense Interest Expense Rent Expense Income Tax Expense Insurance Expense Repairs and Maintenance Expense Total 25,250 20,800 14,500 25,000 30,000 20,000 33,450 44,500 100,000 350 120 38,500 17,250 500 24,000 2,400 1,050 2,400 14,500 5,700 400 316,020 $ 316,020

2. Prepare an income statement for the period ended December 31, 2022. Choose the appropriate accounts to complete the company's income statement. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

3. Prepare a classified balance sheet as of December 31, 2022. Choose the appropriate accounts to complete the company's balance sheet. The unadjusted, adjusted, or post-closing balances will appear for each account, based on your selection.

Answer 1

The journal entries for the first four subparts of Part 1 are as under:

Interest expense (Debit)                              $750

                To Interest payable (Credit)        $750

For accrual of interest for the five month period from August to December

Long term note payable (Debit)                                $10,000

                To Short term note payable (Credit)        $10,000

For reclassification of long term debt to short term debt

Deferred revenue (Debit)            $20,000

                To Revenue (Credit)                       $20,000

For redemption of gift cards accounted for as deferred revenue earlier. The balance revenue will be recorded once redeemed.

Loss on contingency (Debit)        $12,000

                To Contingent liability (Credit)                    $12,000

For recognizing probable loss on contingency

I am supposed to answer only the first 4 subparts of the first question. Please note for each additional (sub part) question you need to create separate questions.