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 37,000 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. Jul. 1 Soll $18,500 of common stock to Suzie. Jul. 1 Sell $18,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $4,440 (5370 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,800 associated with incorporation. Jul. 4 Purchase office supplies of $1,500 on account. Jul. 7 Pay for advertising of $240 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. 8 Purchase 10 mountain bikes, paying $16,800 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $4,200 from 60 bikers. Tony conducta 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 $4,650. Jul. 24 Pay $650 to a local radio station for advertising to appear inmediately. A kayaking clinic vill 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 from 60 kayakers for the upcoming kayak alinie. Aug. 1 Great Adventures obtains a $36,000 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 61 annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $15,400 cash. 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 elinie. Tony conducts the first kayak elinie. Aug. 17 Tony conducts a second kayak elinie, and the company receives $10,600 cash. Aug. 24 Office supplies of $1,500 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 ($260 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14,400 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 $19,500 cash. Dec. 1 Tony decides to hold the company's first adventure race on December 15. Four-person teams will race from checkpoint to checkpoint using a combination of mountain biking, kayaking, orienteering, trail running, and rock-climbing skills. The first team in each category to complete all checkpoints in order vins. The entry fee for each team is $550. Dec. 5 To help organize and promote the race, Tony hires his college roommate, Vietor. Victor will be paid $50 in salary for each team that competes in the race. His salary will be paid after the race. Dec. # The compas pays $1,100 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense. Dec. 12 The company purchases racing supplies for $2,500 on account due in 30 days. Supplies include trophies for the top-finishing teams in each category, promotional shirts, snack foods and drinks for participants, and field markers to prepare the racecourse. Dec. 15 The company receives $22,000 cash from a total of forty teams, and the race is held. Dec. 16 The company pays Victor's salary of $2,000. Dec. 31 The company pays a dividend of $4,400 ($2,200 to Tony and $2,200 to suste). Dec.31 Using his personal money. Tony purchases a diamond ring for $4,400. Tony surprises Susie by proposing that they get married. Suzie accepts and they get married!

Answer 1

1. Journal Entries -

Credit Date Jul 1 Great Adventures Inc. Journal Entries Account Titles Debit Cash $ 18,500 Common Stock (Being Shares issued to Suzie) $ 18,500 Jul 1 Cash $ 18,500 Common Stock (Being Shares issued to Tony) $ 18,500 Jul 1 Prepaid Insurance $ 4,440 Cash $ 4,440 (Being Insurance paid for 1 year in advance) Jul 2 Legal Fees $ 1,800 Cash (Being Legal Fees paid in cash) $ 1,800 Jul 4 Office Supplies $ 1,500 Accounts Payable $ 1,500 (Being Office supplies purchased on account) Jul 7 240 Advertising Expense $ Cash (Being advertising Fees Paid) $ 240 Jul 8 Montain Bikes $ 16,800 Cash (Being 10 mountain bikes purchased) $ 16,800 Jul 15 Cash $ 4,200 Clinic Revenue $ 4,200 (Being Cash received on mountain bike clinic) Jul 22 Cash $ 4,650 Clinic Revenue $ 4,650 (Being Cash received on mountain bike clinic) Jul 24 650 Advertising Expense $ Cash (Being advertising Fees Paid) $ 650 Jul 30 Cash $ 7,800 Unearned Revenue (Being advance revenue received) $ 7,800 Aug 1 Cash $ 36,000 Notes Payable (Long Term) (Being Loan taken for 3 years) $ 36,000 $ 15,400 Aug 4 Kayaks Cash $ 15,400 (Being Kayaks Purchased) Aug 10 Cash $ 3,600 Unearned Revenue $ 7,800 Clinic Revenue (Being Kayaks clinic provided) $ 11,400 Aug 17 Cash $ 10,600 Clinic Revenue (Being Kayaks clinic provided) $ 10,600 Aug 24 Accounts Payable $ 1,500 Cash (Being Accounts Paid on account) $ 1,500 Sept 1 Prepaid Rent $ 3,120 Cash (Being Rent paid in advance for an year) $ 3,120 Sept 21 Cash $ 14,400 Clinic Revenue (Being Clinic service provided) $ 14,400 Oct 17 Cash $ 19,500 Clinic Revenue (Being Clinic service provided) $ 19,500 Dec 1 No Entry Dec 5 No Entry Dec 8 Miscelleneous Expense $ 1,100 Cash (Being Permit purchased to conduct race) $ 1,100 Dec 12 Racing Supplies $ 2,500 Accounts Payable (Being Supplies purchased on account) $ 2,500 Dec 15 Cash $ 22,000 Racing Revenue (Being tournament race revenue) $ 22,000 Dec 16 Salary Expense $ 2,000 Cash (Being victors Salary Paid) $ 2,000 Dec 31 $ 4,400 Dividend Cash $ 4,400 (Being dividend Paid) Dec 31 No Entry

2. Unadjusted Trial Balance -

Credit Great Adventures Inc. Trial Balance (Unadjusted) Account Titles Debit Cash $ 108,300 Prepaid Rent $ 3,120 Prepaid Insurance $ 4,440 Office Supplies $ 1,500 Racing Supplies $ 2,500 Montain Bikes $ 16,800 Kayaks $ 15,400 Accounts Payable Notes Payable (Long Term) Common Stock Dividend $ 4,400 Clinic Revenue Racting Revenue Legal Fees $ 1,800 Advertising Expense $ 890 Miscelleneous Expense $ 1,100 Salary Expense $ 2,000 $ 2,500 $ 36,000 $ 37,000 $ 64,750 $ 22,000 Total $ 162,250 $ 162,250

3. Adjusting Entries -

Great Adventures Inc. Adjusting Entries Date Account Titles Debit Credit Depreciation Expenses $ 6,440 Accumulated Depreciation $ 6,440 (Being depreciation provided on bikes and Kayaks) a b Insurance Expenses $ 2,220 Prepaid Insurance (Being Insurance for 6 months expired) $ 2,220 C Rent Expenses $ 1,040 Prepaid Rent $ 1,040 (Being rent expenses for 4 months incurred) d Office Supplies Expenses $ 1,240 Office Supplies (Being Office Supplies utilised) $ 1,240 e 900 Interest Expenses $ 900 Interest Payable $ (Being Interest Charged on the noted payable) ($36,000*6%*5/12) f Racing Supplies Expenses $ 2,380 Racing Supplies (Being supplies utilised) $ 2,380 Income Tax Expenses $ 13,500 Income Tax Payable (Being income tax incurred) $ 13,500

4. Adjusted Trial Balance -

Credit Great Adventures Inc. Trial Balance (Adjusted) Account Titles Debit Cash $ 108,300 Prepaid Rent $ 2,080 Prepaid Insurance $ 2,220 Office Supplies $ 260 Racing Supplies $ 120 Montain Bikes $ 16,800 Kayaks $ 15,400 Accumulated Depreciation Accounts Payable Interest Payable Income Tax Payable Notes Payable (Long Term) Common Stock Dividend $ 4,400 Clinic Revenue Racing Revenue Legal Fees $ 1,800 Advertising Expense $ 890 Miscelleneous Expense $ 1,100 Salary Expense $ 2,000 Depreciation Expenses $ 6,440 Insurance Expenses $ 2,220 Rent Expenses $ 1,040 Office Supplies Expenses $ 1,240 Interest Expenses $ 900 Racing Supplies Expenses $ 2,380 Income Tax Expenses $ 13,500 $ 6,440 $ 2,500 $ 900 $ 13,500 $ 36,000 $ 37,000 $ 64,750 $ 22,000 Total $183,090 $183,090

5. Income Statement -

$ 64,750 $ 22,000 $ 86,750 Great Adventures Inc. Income Statement For the period ended December 31, 2021 Clinic Revenue Racing Revenue Total Revenue Operating Expenses: Legal Fees $ 1,800 Advertising Expense $ 890 Miscelleneous Expense $ 1,100 Salary Expense $ 2,000 Depreciation Expenses $ 6,440 Insurance Expenses $ 2,220 Rent Expenses $ 1,040 Office Supplies Expenses $ 1,240 Racing Supplies Expenses $ 2,380 Total Operating Expenses $ 19,110 $ 67,640 Operating Profit Non Operating Expenses: Interest Expenses Income Before Tax $ 900 $ 66,740 (-) Income Tax Expenses $ 13,500 Net Income $ 53,240

6. Statement of Stockholder's Equity -

Great Adventures Inc. Statement of Stockholder's Equity As at December 31, 2021 Common Stock Retained Earnings Dividend $ (4,400) Net Income $ 53,240 $ 37,000 $ 48,840 $ 85,840 Total Stockholder's Equity

7. Balance Sheet -

Great Adventures Inc. Balance Sheet As at December 31, 2021 Assets: Current Assets Cash $ 108,300 Prepaid Rent $ 2,080 Prepaid Insurance $ 2,220 Office Supplies $ 260 Racing Supplies $ 120 Total Current Assets $112,980 Non Current Assets Montain Bikes $ 16,800 Kayaks $ 15,400 Accumulated Depreciation $ (6,440) $ 25,760 Total Assets $ 138,740 Liabilities and Stockholder's Equity: Current Liabilities Accounts Payable Interest Payable Income Tax Payable Total Current Liabilities $ 2,500 $ 900 $ 13,500 $ 16,900 Non Current Liabilities Notes Payable (Long Term) $ 36,000 Total Liabilities $ 52,900 Stockholder's Equity Common Stock Retained Earnings $ 37,000 $ 48,840 Total Stockholder's Equity $ 85,840 Total Liabilities and Stockholder's Equity $ 138,740

8. Closing Entries -

Date Credit 1 Great Adventures Inc. Closing Entries Account Titles Debit Clinic Revenue $ 64,750 Racing Revenue $ 22,000 Income Summary (Being Revenue Account Closed) $ 86,750 2 Income Summary $ 33,510 Legal Fees Advertising Expense Miscelleneous Expense Salary Expense Depreciation Expenses Insurance Expenses Rent Expenses Office Supplies Expenses Interest Expenses Racing Supplies Expenses Income Tax Expenses (Being Expenses Account Closed) $ 1,800 $ 890 $ 1,100 $ 2,000 $ 6,440 $ 2,220 $ 1,040 $ 1,240 $ 900 $ 2,380 $ 13,500 3 Income Summary $ 53,240 Retained Earnings (Being Balance transferred) $ 53,240 4 Retained Earnings $ 4,400 Dividend $ 4,700 (Being dividend and drawings account closed)

9. Post Closing Trial Balance -

Credit Great Adventures Inc. Post Closing Trial Balance Account Titles Debit Cash $ 108,300 Prepaid Rent $ 2,080 Prepaid Insurance $ 2,220 Office Supplies $ 260 Racing Supplies $ 120 Montain Bikes $ 16,800 Kayaks $ 15,400 Accumulated Depreciation Accounts Payable Interest Payable Income Tax Payable Notes Payable (Long Term) Common Stock Retained Earnings $ 6,440 $ 2,500 $ 900 $ 13,500 $ 36,000 $ 37,000 $ 48,840 Total $ 145,180 $ 145,180