Question

(The following information applies to the questions displayed below 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 emthusiasts. 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 27000 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 1 Sell $13,500 of common stock to Suzie 1 Sell $13,500 of common stock to Tony- 1 Purchase a one-year insurance policy for $5,640 ($470 per nonth) to cover injuries to participants during outdoor clinics 2 Pay legal fees of $1,200 associated with incorporation 4 Purchase office supplies of $1,300 on account. 7 Pay for advertising of $400 to a local newspaper for an upcoming mountain biking clinie to be held on July 15. Attendees wi11 be charged $60 on the day of the clinic 8 Purchase 10 mountain bikes, paying $16,500 cash. Jul. Jul. Jul. Jul. Jul. Jul. Jul. Oul. 15 On the day of the clinic, Great Adventures receives cash of $3,000 from 50 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 $3,see. Jul. 24 Pay $930 to a local radio station for advertising to appear innediately. A kayaking clinic will be held on August 10, and attendees can pay $130 in advance or $180 on the day of the clinic. Jul. 30 Great Adventures receives cash of $7.800 in advance fron 60 kayakers for the upcoming kayak clinic Aug. 1 Great Adventures obtains a $38,000 1ow-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 3uly 31. 4 The company purchases 14 kayaks, paying $26,600 cash Aug. Aug. 10 Twenty additional kayakers pay $3,600 ($180 each), in addition to the $7,800 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 $11.000 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

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 $ 27000 27000 5640 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 16630 Prepaid Insurance 5640 Office Supplies 1300 Equipment(Bikes) 16500 Accounts Payable 1300 Common Stock 27000 Service revenue (Racing) 6500 Unearned Kayaking Service 7800 Legal Fees 1200 Advertising Expense 1330 Totals 42600 42600 5640 1200 2.7.2021 Legal Fees a/c Dr. To Cash (Being Legal Fees paid in Cash) 1200 1300 4.7.2021 Office Supplies a/c Dr. To Accounts Payable (Being Supplies purchased on account) 1300 7.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to newspaper) 400 16500 8.7.2021 Mountain Bikes a/c Dr. To Cash (Being 10 Mountain Bikes purchased for cash) 16500 3000 15.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 3000 3500 22.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 3500 930 24.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to local radio station) 7800 30.7.2021 Cash a/c Dr. To Unearned Kayaking Service (Being Advance received for Kayaking service) 7800

Adjusted Trial Balance As at 31.12.2021 Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ Particulars Assets Cash 84110 2820 2480 400 390 16500 84110 2820 2480 400 390 16500 7200 7200 26600 26600 2800 950 14500 2800 950 14500 38000 38000 27000 27000 42850 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 76200 6500 1330 1200 1600 1600 7200 2820 1240 900 2410 950 14500 173150 173150 133300 133300 Retaned Earnings Dividends 4100 Bal Income Summary Bal. 42850 46950 46950 46950

76200 6500 82700 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 1330 1200 1600 1600 7200 2820 1240 900 2410 950 14500 35750 46950 Statement of Retained Earnings Net Income Less:Dividends 31.12.2021 46950 -4100 42850 Statement of Retained Earnings For the period ending 31.12.2021 1.8.2021 Add:Net Income Less:Dividends Common Retained Stock Earnings 27000 46950 -4100 27000 42850 Total Equity 27000 46950 -4100 69850

Amounts in $ Amounts in $ Balance sheet As at 31.12.2021 Assets Current Assets Cash Prepaid insurance Prepaid rent Supplies (Office) Racing Supplies 2800 Amounts in $ Amounts in $ Liabilities Current Liabilities 84110 Accounts payable 2820 Interest payable 2480 Income tax payable 400 390 90200 Non Current Liabilities Loan 950 14500 18250 38000 Non Current Assets Equipment(Bikes) Kayaks Accumulated Depreciation Total Assets 16500 26600 -7200 Shareholders Equity Common stock 27000 35900 Retained Earnings 42850 126100 Total Liabilities & Shareholders Eq. 69850 126100