Question

Required information Great Adventures Problem AP3-1 [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 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 33,000 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 $16,500 of common stock to Suzie. Jul. 1 Sell $16,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $5,760 ($480 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,900 associated with incorporation. Jul. 4 Purchase office supplies of $1,300 on account. Jul. 7 Pay for advertising of $270 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $40 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $12,200 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $2,400 from 60 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 $2,850. Jul. 24 Pay $870 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $150 in advance or $200 on the day of the clinic. Jul. 30 Great Adventures receives cash of $9,000 in advance from 60 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $40,000 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 $23,800 cash. Aug. 10 Twenty additional kayakers pay $4,000 ($200 each), in addition to the $9,000 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 $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 one year, paying $4,560 ($380 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $13,800 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 $18,500 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 wins. The entry fee for each team is $590. Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $70 in salary for each team that competes in the race. His salary will be paid after the race. Dec. 8 The company pays $2,000 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 $2,300 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 $23,600 cash from a total of forty teams, and the race is held. Dec. 16 The company pays Victor's salary of $2,800. Dec. 31 The company pays a dividend of $4,300 ($2,150 to Tony and $2,150 to Suzie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $5,300. Tony surprises Suzie by proposing that they get married. Suzie accepts and they get married! The following information relates to year-end adjusting entries as of December 31, 2021. a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,400. b. Six months' of the one-year insurance policy purchased on July 1 has expired. c. Four months of the one-year rental agreement purchased on September 1 has expired. d. Of the $1,300 of office supplies purchased on July 4, $270 remains. e. Interest expense on the $40,000 loan obtained from the city council on August 1 should be recorded. f. Of the $2,300 of racing supplies purchased on December 12, $260 remains. g. Suzie calculates that the company owes $15,000 in income taxes.
Sorry it is so long but this is all one question!

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 $ 33000 33000 Debit in $ Credit in $ 26250 5760 1300 Dr. 5760 12200 1.7.2021 Prepaid Insurance a/c To Cash (Being Insurance paid in cash) Trial Balance For the period ending 31.7.2021 Particulars Cash Prepaid Insurance Office Supplies Equipment(Bikes) Accounts Payable Common Stock Mountain Biking Service Unearned Kayaking Service Legal Fees Advertising Expense Totals 5760 1300 33000 5250 1900 9000 2.7.2021 Legal Fees a/c Dr. To Cash (Being Legal Fees paid in Cash) 1900) 1900 1140 48550 48550 Dr. 1300 4.7.2021 Office Supplies a/c To Accounts Payable (Being Supplies purchased on account) 1300 270 7.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to newspaper) 270 12200 8.7.2021 Mountain Bikes a/c Dr. To Cash (Being 10 Mountain Bikes purchased for cash) 12200 2400 15.7.2021 Cash a/c Dr. To Mountain Biking Service (Being cash collected from Mountain Bike attendees) 2400 2850 22.7.2021 Cash a/c Dr. To Mountain Biking Service (Being cash collected from Mountain Bike attendees) 2850 870 24.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to local radio station) 870 9000 30.7.2021 Cash a/c Dr. To Unearned Kayaking Service (Being Advance received for Kayaking service) 9000

Journal Enteries Date Particulars 1.8.2021 Cash a/c Dr. To Loan (Being Loan taken from city council) Debit in $Credit in $ 40000 40000 23800 4.8.2021 Kayaks a/c Dr. To Cash (Kayaks purchased in cash) 23800 4000 9000 10.8.2021 Cash a/c Dr. Deferred revenue a/c Dr. To Service Revenue (Being revenue recognized) 13000 11000 17.8.2021 Cash a/c Dr. To Service Revenue 11000 1300 24.8.2021 Accounts Payable a/c Dr. To Cash (Being Accounts Payable paid in cash) 1300 4560 1.9.2021 Prepaid rent a/c Dr. To Cash (Being rent paid in cash) 380 4560 13800 21.9.2021 Cash a/c Dr. To Service Revenue (Being services performed for cash) 13800 18500 17.10.2021 Cash a/c Dr. To Service Revenue (Being services performed for cash) 18500 2000 8.12.2021 Miscellaneous expense a/c Dr. To Cash (Being permit purchased in cash) 2000 2300 12.12.2021 Racing Supplies a/c Dr. To Accounts Payable (Being Racing supplies purchased on account) 2300 23600 15.12.2021 Cash a/c Dr. To Service Revenue (Being services performed for cash) 23600 2800 16.12.2021 Salary expense a/c Dr. To Cash (Being salary paid to Victor in cash) 2800 43001 31.12.2021 Dividend a/c Dr. To Cash (Being dividend paid to Tony and Suzie) 4300 31.12.2021 No Entry

Adjusting Enteries Date Particulars 31.12.2021 Depreciation a/c To Accumulated Depreciation (Being depreciation charged to asset) Dr Debit in $ Credit in $ 8400 8400 31.12.2021 Insurance expense a/c Dr. 2880 To Prepaid Insurance (Being Insurance expense charged to Prepaid insurance) 2880 31.12.2021 Rent expense a/c Dr. 1520 To Prepaid Rent (Being rent expense charged to Prepaid Rent) 380 x 4 = 1520 1520 1030 1030 31.12.2021 Office Supplies expense a/c Dr. To Office Supplies (Being Supplies expense charged to Office Supplies.) (1300 - 270) 31.12.2021 Interest expense a/c Dr. To Interest payable 40000 * 6% * 5/12 (Being Interest expense accrued) 1000 1000 2040 31.12.2021 Racing Supplies expense a/c Dr. 2040 To Racing Supplies (Being racing supplies expense charged to racing supplies) 2300 - 260 31.12.2021 Income tax expense a/c Dr. 15000 To Income tax payable (Being income tax accrued) 15000 Closing Enteries Date Particulars 31.12.2021 Income Summary a/c Dr. To Advertising expense To Legal fees expense To Miscellaneous expense To Salary expense To Depreciation To Insurance expense To Rent expense To Office Supplies expense To Racing Supplies expense To Interest expense To Income tax expense (Being expenses closed to Income summary) Debit in $ Credit in $ 39710 1140 1900 2000 2800 8400 2880 1520 1030 2040 1000 15000 851501 31.12.2021 Service revenue (Clinic) a/c Dr. To Income Summary (Being Revenues closed to Income summary) 85150 454401 31.12.2021 Income Summary a/c Dr. To Retained Earnings (Being profit transferred to Retained earnings) 45440 43001 31.12.2021 Retained Earnings a/c Dr. To Dividends (Being dividends charge to Retained Earnings) 4300

Adjusted Trial Balance As at 31.12.2021 85150 Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ 1140 1900 98390 2880 98390 2880 2000 3040 3040 2800 Statement of Income For the period ending 31.12.2021 Service revenue (Clinic) 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 270 270 8400 2880 260 260 12200 12200 1520 8400 8400 1030 23800 23800 2040 1000 2300 2300 15000 39710 1000 1000 45440 15000 15000 0 40000 40000 45440 Particulars Assets Cash 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) 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 Statement of Retained Earnings Net Income Less:Dividends 31.12.2021 -4300 33000 33000 41140 41140 4300 85150 1140 1900 2000 2800 8400 2880 1520 1030 2040 1000 15000 184850 184850 140840 140840 0 0 0 Retaned Earnings Dividends 4300 Bal Income Summary Bal. 41140 45440 45440 45440

Amounts in $ Amounts in $ 2300 As at 31.12.2021 Assets Current Assets Cash Prepaid insurance Prepaid rent Supplies (Office) Racing Supplies 1000 Amounts in $ Amounts in $ Liabilities Current Liabilities 98390 Accounts payable 2880 Interest payable 3040 Income tax payable 270 260 104840 Non Current Liabilities Loan 15000 18300 40000 12200 Non Current Assets Equipment(Bikes) Kayaks Accumulated Depreciation Total Assets 23800 Shareholders Equity Common stock 33000 27600 Retained Earnings 41140 132440 Total Liabilities & Shareholders Eq. -8400 74140 132440