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 20,000 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 $10,000 of common stock to Suzie. Jul. 1 Sell $10,000 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $4,800 ($400 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,500 associated with incorporation. Jul. 4 Purchase office supplies of $1,800 on account. Jul. 7 Pay for advertising of $300 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 $12,000 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 $2,300. Jul. 24 Pay $ 700 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $100 in advance or $150 on the day of the clinic. Jul. 30 Great Adventures receives cash of $4,000 in advance from 40 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $30,000 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 6% annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $28,000 cash. Aug. 10 Twenty additional kayakers pay $3,000 ($150 each), in addition to the $4,000 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 $10,500 cash. Aug. 24 Office supplies of $1,800 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 $2,400 ($200 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $13,200 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 $17,900 cash.

Answer 1

35 Closing entries 31-Dec Service revenue (Clinic) Service revenue (Racing) Retained Earnings 52,900 20,000 72,900 36 35,750 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 1,000 1,500 1,200 2,000 8,000 2,400 800 1,500 2,600 750 14,000 37 4,000 31-Dec Retained Earnings Dividends 4,000

Credit Date Credit Date Credit Credit Debit Date Prepaid Insurance 4,800 31-Dec Debit Date Prepaid Rent 2,400 31-Dec Date Debit Date Supplies (Office) 4-Jul 1,800 31-Dec 1-Jul 2,400 1-Sep 800 1,500 Great Adventures Inc. T Accounts Date Debit Date Cash 1-Jul 10,000 1-Jul 1-Jul 10,000 2-Jul 15-Jul 2,000 7-Jul 22-Jul 2,300 8-Jul 30-Jul 4,000 24-Jul 1-Aug 30,000 10-Aug 3,000 24-Aug 17-Aug 10,500 1-Sep 21-Sep 13,200 8-Dec 17-Oct 17,900 16-Dec 15-Dec 20,000 31-Dec 4-Aug 4,800 1,500 300 12,000 700 28,000 1,800 2,400 1,200 2,000 4,000 Bal. Bal. 2,400 Bal. 1,600 Bal. 300 64,200 Supplies (Racing) 2,800 31-Dec Equipment (Bikes) 12,000 Equipment (Kayaks) 28,000 Accum. Depreciation 31-Dec 12-Dec 2,600 8 -Jul 4-Aug 8,000 Bal. Bal. Bal. 8,000 12,000 Deferred Revenue 4,000 30-Jul Accounts Payable 1,800 4-Jul 12-Dec 28,000 Interest Payable 31-Dec Bal. Income taxes payable 31-Dec 24-Aug 10-Aug 4,000 750 14,000 1,800 2,800 2,800 Bal. 750 14,000 Bal. Notes Payable 1-Aug Bal. Dividends 4,000 31-Dec Common Stock 1-Jul 1-Jul 30,000 31-Dec Bal. Retained Earnings 35,750 31-Dec 4,000 10,000 10,000 72,900 31-Dec 31-Dec 4,000 30,000 20,000 Bal. 33,150 Bal. Service revenue (Racing) 16-Dec Bal. Legal fees expense 1,500 20,000 Advertising expense 300 700 7-Jul 24-Jul 2-Jul Bal. Service revenue (Clinic) 15-Jul 22-Jul 10-Aug 17-Aug 21-Sep 31-Dec 52,900 17-Oct 2,000 2,300 7,000 10,500 13,200 17,900 31-Dec 20,000 31-Dec 1,000 31-Dec 1,500 - Bal. Bal. Misc expense 1,200 31-Dec Bal. Salary expense 2,000 31-Dec Bal. Depreciation expense 31-Dec 8,000 31-Dec 8-Dec 16-Dec 31-Dec Insurance expense 2,400 31-Dec 1,200 2,000 8,000 2,400 Bal. Bal. Bal. Supplies (Office) expense 31-Dec 1,500 31-Dec Rent expense 800 31-Dec Bal. Supplies (Racing) expense 31-Dec 2,600 31-Dec .. Interest expense 750 31-Dec 31-Dec 31-Dec 800 1,500 2,600 750 Bal. Bal. 31-Dec Income tax expense 14,000 31-Dec 14,000 Bal.