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. 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. 2 Pay legal fees of $1,500 associated with incorporation. Jul. 4 Purchase office supplies of $1,800 on account. 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. 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. Jul. Jul. Jul.

Answer 1

1. Journal Entries -

Credit Date Jul 1 Great Adventures Inc. Journal Entries Account Titles Debit Cash $ 10,000 Common Stock (Being Shares issued to Suzie) $ 10,000 Jul 1 Cash $ 10,000 Common Stock (Being Shares issued to Tony) $ 10,000 Jul 1 Prepaid Insurance $ 4,800 Cash $ 4,800 (Being Insurance paid for 1 year in advance) Jul 2 Legal Fees $ 1,500 Cash (Being Legal Fees paid in cash) $ 1,500 Jul 4 Office Supplies $ 1,800 Accounts Payable $ 1,800 (Being Office supplies purchased on account) Jul 7 300 Advertising Expense $ Cash (Being advertising Fees Paid) $ 300 Jul 8 Equipment $ 12,000 Cash (Being 10 mountain bikes purchased) $ 12,000 Jul 15 Cash $ 2,000 Service revenue $ 2,000 (Being Cash received on mountain bike clinic) Jul 22 Cash $ 2,300 Service revenue $ 2,300 (Being Cash received on mountain bike clinic) Jul 24 700 Advertising Expense $ Cash (Being advertising Fees Paid) $ 700 Jul 30 Cash $ 4,000 Unearned Revenue (Being advance revenue received) $ 4,000 Aug Cash $ 30,000 6% Long term Loan (Being Loan taken for 3 years) $ 30,000 Aug 4 Equipment $ 28,000 Cash (Being Kayaks Purchased) $ 28,000 Aug 10 Cash $ 3,000 Unearned Revenue $ 4,000 Service Revenue (Being Kayaks clinic provided) $ 7,000 Aug 17 Cash $ 10,500 Service revenue (Being Kayaks clinic provided) $ 10,500 Aug 24 Accounts Payable $ 1,800 Cash (Being Accounts Paid on account) $ 1,800 Sept 1 Prepaid Rent $ 2,400 Cash (Being Rent paid in advance for an year) $ 2,400 Sept 21 Cash $ 13,200 Service revenue $ 13,200 (Being Cash received for rock climbing clinic) Oct 17 Cash $ 17,900 Service revenue (Being Cash received for orientation clinic) $ 17,900 Dec 1 No Entry Dec 5 No Entry Dec 8 Miscelleneous $ 1,200 Cash (Being Permit purchased to conduct race) $ 1,200 Dec 12 Racing Supplies $ 2,800 Accounts Payable (Being Supplies purchased on account) $ 2,800 Dec 15 Cash $ 20,000 Revenue - Racing (Being tournament race revenue) $ 20,000 Dec 16 Salary Expense $ 2,000 Cash (Being victors Salary Paid) $ 2,000 Dec 31 Dividend $ 4,000 Cash (Being dividend Paid) $ 4,000 Dec 31 No Entry $

2. Adjusting Entries -

Great Adventures Inc. Adjusting Entries Date Account Titles Debit Credit Dec 31 Depreciation Expenses $ 8,000 Accumulated Depreciation $ 8,000 (Being depreciation provided on bikes and Kayaks) Dec 31 Insurance Expenses $ 2,400 Prepaid Insurance (Being Insurance for 6 months expired) $ 2,400 Dec 31 Rent Expenses $ 800 Prepaid Rent $ (Being rent expenses for 4 months incurred) 800 Dec 31 Office Supplies Expenses $ 1,500 Office Supplies (Being Office Supplies utilised) $ 1,500 750 Dec 31 Interest Expenses $ 750 Interest Payable $ (Being Interest Charged on the noted payable) (=30000*6%*5/12) Dec 31 Racing Supplies Expenses $ 2,600 Racing Supplies (Being supplies utilised) $ 2,600 Dec 31 Income Tax Expenses $ 14,000 Income Tax Payable (Being income tax incurred) $ 14,000

3. T- Accounts -

Date Dividend Debit Date $ 4,000 Credit Dec 31 Dec 31 $ 4,000 Cash Date Debit Date Jul 1 $ 10,000 Jul 1 Jul 1 $ 10,000 Jul 2 Jul 15 $ 2,000 Jul 7 Jul 22 $ 2,300 Jul 8 Jul 30 $ 4,000 Jul 24 Aug 1 $ 30,000 Aug 10 $ 3,000 Aug 24 Aug 17 $ 10,500 Sept 21 $ 13,200 Dec 8 $ 17,900 Dec 16 Dec 15 $ 20,000 Dec 31 $ 4,000 $ 4,000 Credit $ 4,800 $ 1,500 $ 300 $ 12,000 $ 700 $ 28,000 $ 1,800 $ 2,400 $ 1,200 $ 2,000 $ 4,000 Aug 4 Sept 1 Date Oct 17 Service revenue Debit Date Credit Jul 15 $ 2,000 Jul 22 $ 2,300 Aug 10 $ 7,000 Aug 17 $ 10,500 Sept 21 $ 13,200 $ 52,900 Oct 17 $17.900 Dec 31 $ 64,200 Dec 31 $ 122,900 $122,900 $ 52,900 $ 52,900 Date Sept 1 Prepaid Rent Debit Date $ 2,400 Dec 31 Credit $ 800 Date Revenue - Racing Debit Date Dec 15 $ 20,000 Credit $ 20,000 Dec 31 $ 1,600 Dec 31 $ 2,400 $ 2,400 $ 20,000 $ 20,000 Date Prepaid Insurance Debit Date $ 4,800 Dec 31 Credit Credit $ 2,400 Date Jul 2 Legal Fees Debit Date $ 1,500 Dec 31 Jul 1 $ 1,500 Dec 31 $ 2,400 $ 1,500 $ 1,500 $ 4,800 $ 4,800 Credit Office Supplies Debit Date $ 1,800 Dec 31 Date Advertising Expense Debit Date $ 300 $ 700 Dec 31 Date Jul 7 Jul 24 Credit $ 1,500 Jul 4 $ 1,000 $ 1,000 $ 1,000 Miscelleneous Expense Date Debit Date Credit Dec 8 $ 1,200 Dec 31 $ 1,200 Racing Supplies Debit Date $ 2,800 Dec 31 Date Credit $ 2,600 Dec 12 Dec 31 $ 200 $ 1,200 $ 1,200 $ 2,800 $ 2,800 Salary Expense Debit Date $ 2,000 Date Dec 16 Credit Credit Date Jul 8 Equipment Debit Date $ 12,000 $ 28,000 Dec 31 Dec 31 $ 2,000 Aug 4 $ 40,000 $ 2,000 $ 2,000 $ 40,000 $ 40,000 Depreciation Expenses Date Debit Date Credit Dec 31 $ 8,000 Accumulated Depreciation Date Debit Date Credit Dec 31 $ 8,000 Dec 31 $ 8,000 Dec 31 $ 8,000 $ 8,000 $ 8,000 $ 8,000 $ 8,000 Date Insurance Expenses Debit Date $ 2,400 Credit Dec 31 Date Aug 24 Accounts Payable Debit Date $ 1,800 Jul 4 Dec 12 $ 2,800 Credit $ 1,800 $ 2,800 Dec 31 $ 2,400 Dec 31 $ 2,400 $ 2,400 $ 4,600 $ 4,600 Credit Date Dec 31 Rent Expenses Debit Date $ 800 Dec 31 Interest Payable Debit Date Date $ 800 Credit 750 Dec 31 $ Dec 31 $ 750 $ 800 $ 800 $ 750 $ 750 Office Supplies Expenses Date Debit Date Credit Dec 31 $ 1,500 Dec 31 $ 1,500 Date Income Tax Payable Debit Date Dec 31 Credit $ 14,000 $ 1,500 $ 1,500 Dec 31 $ 14,000 $ 14,000 $ 14,000 Date Interest Expenses Debit Date $ 750 Credit Dec 31 Date 6% Long term Loan Debit Date Aug 1 Dec 31 $ 750 Credit $ 30,000 $ 750 $ 750 Dec 31 $ 30,000 Racing Supplies Expenses Date Debit Date Credit Dec 31 $ 2,600 $ 30,000 $ 30,000 Dec 31 $ 2,600 Date Common Stock Debit Date Jul 1 Credit $ 10,000 $ 10,000 Jul 1 $ 2,600 $ 2,600 Dec 31 $ 20,000 Income Tax Expenses Date Debit Date Dec 31 $ 14,000 Credit $ 20,000 $ 20,000 Dec 31 $ 14,000 Date Unearned Revenue Debit Date $ 4,000 Jul 30 Credit $ 4,000 Aug 10 $ 14,000 $ 14,000 $ 4,000 $ 4,000