Question

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 29,000 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 $14,500 of common stock to Suzie. Jul. 1 Sell $14,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $3,720 ($310 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,600 associated with incorporation. Jul. 4 Purchase office supplies of $1,600 on account. Jul. 7 Pay for advertising of $290 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 $10,300 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $2,000 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 $2,500. Jul. 24 Pay $690 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $120 in advance or $170 on the day of the clinic. Jul. 30 Great Adventures receives cash of $4,800 in advance from 40 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $33,000 low-interest loan for the company from the city council, which has recently passed an initiative encouraging business development relate ment 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 $11,000 cash. Aug. 10 Twenty additional kayakers pay $3,400 ($170 each), in addition to the $4,800 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 $10,600 cash. Aug. 24 Office supplies of $1,600 purchased on Jul 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 $4,440 ($370 per month) in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14,000 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 $18,100 cash. Dec. 1 Tony decides to hold the company's firs 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 $690. 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 $1,900 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 $27, 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 $3,700 ($1,850 to Tony and $1,850 to Suzie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $5,200. 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 $4,260. 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 $1,600 of office supplies purchased on July 4, $390 remains. e. Interest expense on the $33,000 loan obtained from the city council on August 1 should be recorded. f. Of the $2,300 of racing supplies purchased on December 12, $240 remains. g. Suzie calculates that the company owes $13,300 in income taxes.

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 $ 29000 29000 3720 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 21700 Prepaid Insurance 3720 Office Supplies 1600 Equipment(Bikes) 10300 Accounts Payable 1600 Common Stock 29000 Service revenue (Racing) 4500 Unearned Kayaking Service 4800 Legal Fees 1600 Advertising Expense 980 Totals 39900 39900 3720 1600 2.7.2021 Legal Fees a/c Dr. To Cash (Being Legal Fees paid in Cash) 1600 1600 4.7.2021 Office Supplies a/c Dr. To Accounts Payable (Being Supplies purchased on account) 1600 290 7.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to newspaper) 10300 8.7.2021 Mountain Bikes a/c Dr. To Cash (Being 10 Mountain Bikes purchased for cash) 10300 2000 15.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 2000 2500 22.7.2021 Cash a/c Dr. To Service revenue (Racing) (Being cash collected from Mountain Bike attendees) 2500 690 24.7.2021 Advertising Expense a/c Dr. To Cash (Being advertising expense paid to local radio station) 4800 30.7.2021 Cash a/c Dr. To Unearned Kayaking Service (Being Advance received for Kayaking service) 4800

Journal Enteries Date Particulars 1.8.2021 Cash a/c Dr. To Loan (Being Loan taken from city council) Debit in $Credit in $ 33000 33000 4.8.2021 11000 Kayaks a/c Dr. To Cash (Kayaks purchased in cash) 11000 3400 4800 10.8.2021 Cash a/c Dr. Deferred revenue a/c Dr. To Service revenue (Clinic) (Being revenue recognized) 8200 10600 17.8.2021 Cash a/c Dr. To Service revenue (Clinic) 10600 16001 24.8.2021 Accounts Payable a/c Dr. To Cash (Being Accounts Payable paid in cash) 1600 4440 1.9.2021 Prepaid rent a/c Dr. To Cash (Being rent paid in cash) 370 per month 4440 14000 21.9.2021 Cash a/c Dr. To Service revenue (Clinic) (Being services performed for cash) 14000 18100 17.10.2021 Cash a/c Dr. To Service revenue (Clinic) (Being services performed for cash) 18100 1900 8.12.2021 Miscellaneous expense a/c Dr. To Cash (Being permit purchased in cash) 1900 23001 12.12.2021 Racing Supplies a/c Dr. To Accounts Payable (Being Racing supplies purchased on account) 2300 276001 15.12.2021 Cash a/c Dr. To Service revenue (Racing) (Being services performed for cash) 27600 2800 16.12.2021 Salary expense a/c Dr. To Cash (Being salary paid to Victor in cash) 2800 3700 31.12.2021 Dividend a/c Dr. To Cash (Being dividend paid to Tony and Suzie) 3700 31.12.2021 No Entry

Adjusting Enteries Date Particulars 31.12.2021 Depreciation a/c Dr. To Accumulated Depreciation (Being depreciation charged to asset) Debit in $ Credit in $ 4260 4260 31.12.2021 Insurance expense a/c Dr. 1860) To Prepaid Insurance (Being Insurance expense charged to Prepaid insurance) 1860 31.12.2021 Rent expense a/c Dr. 1480 To Prepaid Rent (Being rent expense charged to Prepaid Rent) 330 x 4 = 1320 1480 1210 1210 31.12.2021 Office Supplies expense a/c Dr. To Office Supplies (Being Supplies expense charged to Office Supplies.) 1600 - 390 31.12.2021 Interest expense a/c Dr. To Interest payable 33000 * 6% * 5/12 (Being Interest expense accrued) 825 825 2060 31.12.2021 Racing Supplies expense a/c Dr. 2060 To Racing Supplies (Being racing supplies expense charged to racing supplies) 2300 - 240 31.12.2021 Income tax expense a/c Dr. 13300 To Income tax payable (Being income tax accrued) 13300 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 $ 32275 980 1600 1900 2800 4260 1860 1480 1210 2060 825 13300 78500 4500 31.12.2021 Service revenue (Clinic) a/c Dr. Service revenue (Racing) a/c Dr. To Income Summary (Being Revenues closed to Income summary) 83000 50725 31.12.2021 Income Summary a/c Dr. To Retained Earnings |(Being profit transferred to retained earnings) 50725 3700 31.12.2021 Retained Earnings a/c Dr. To Dividends (Being dividends charge to Retained Earnings) 3700

Adjusted Trial Balance As at 31.12.2021 Adjusted Post Closing Debit in $ Credit in $ Debit in $ Credit in $ 102960 1860 2960 102960 1860 2960 390 390 240 240 10300 10300 4260 4260 11000 11000 2300 825 13300 2300 825 13300 33000 33000 29000 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) 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 29000 47025 3700 78500 4500 980 1600 1900 2800 4260 1860 1480 1210 2060 825 13300 165685 129710 129710 165685 0

78500 4500 83000 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 980 1600 1900 2800 4260 1860 1480 1210 2060 825 13300 32275 50725 Statement of Retained Earnings Net Income Less:Dividends 31.12.2021 50725 -3700 47025 Statement of Retained Earnings For the period ending 31.12.2021 1.8.2021 Add:Net Income Less:Dividends Common Retained Stock Earnings 29000 50725 -3700 29000 47025 Total Equity 29000 50725 -3700 76025

Amounts in $ Amounts in $ Balance sheet As at 31.12.2021 Assets Current Assets Cash Prepaid insurance Prepaid rent Supplies (Office) Racing Supplies Amounts in $ Amounts in $ Liabilities Current Liabilities 102960 Accounts payable 1860 Interest payable 2960 Income tax payable 390 240 108410 Non Current Liabilities Loan 2300 825 13300 16425 33000 Non Current Assets Equipment(Bikes) Kayaks Accumulated Depreciation Total Assets 10300 11000 -4260 Shareholders Equity Common stock 29000 17040 Retained Earnings 47025 125450 Total Liabilities & Shareholders Eq. 76025 125450