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 35,000 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 $17,500 of common stock to Suzie. Jul. 1 Sell $17,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $5,400 ($450 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 $1,300 on account. Jul. 7 Pay for advertising of $310 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $60 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $12,100 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $3,600 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 $4,150.

Answer 1

workings:

Post closing trial balance $105,680 $ $ Cash 2,700 $ $ Prepaid Insurance Prepaid Rent Supplies (Office) |Supplies (Racing) Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Accounts Payable 1,920 $ $ $ 340 $ 190 $ $ 12,100 $ $ 23,400 $ $ 7,300 $ $ $ $ 2,700 Income Tax Payable $ $ 14,900 Interest Payable Notes Payable 825 $ $ $ 33,000 $ Deferred revenue Common Stock $ $ 35,000 retained earnings 52,605 $146,330 $ 146,330 total I

Great Adventures, Inc. Journal Entries: Transaction Debit Credit Date 01-Jul Cash 17500 17500 common stock 01-Jul Cash 17500 17500 common stock Prepaid insurance 01-Jul 5400 cash 5400 02-Jul Leagl expenses 1500 cash 1500 Office supplies accounts payable 04-Jul 1300 1300 Advertising expenses 07-Jul 310 cash 310 Equipment(Mountain bikes) cash 12100 08-Jul 12100 15-Jul Cash 3600 service revenue 3600 22-Jul Cash 4150 4150 service revenue Advertising expenses 24-Jul 780 cash 780

Cash Deferred revenue 30-Jul 10500 10500 August 1 Cash Notes Payable (Obtain loan from city council 33,000 33,000 4 Equipment(Kayaks) 23,400 Cash 23,400 (Pay cash for kayaks) 10 Deferred Revenue 10,500 Cash 4,000 Sevice Revenue(Clinc) (Receive cash and hold kayak clinic) 14,500 (you can post two separate entries ; I have posted cumulative) 17 Cash 11,000 Sevice Revenue(Clinc) 11,000 (Receive cash and hold kayak clinic) 24 Accounts Payable 1,300 Cash 1,300 (Pay cash on account) 1 Prepaid Rent September 2,880 Cash 2,880 (Pay cash for one-year rental policy) 21 Cash 13,700 Service Revenue(Clinic) 13,700 (Receive cash for rock climbing clinic) 17 Cash October 18,700 18,700 Service Revenue(Clinic) (Receive cash for orienteering clinic) 8 Misc Expense December 1,100 Cash (Pay cash for race permit) 1,100 12 Supplies(Racing) Accounts Payable (Purchase racing supplies on account) 2,700 2,700 15 Cash 26,400 Service Revenue(Race) 26,400 (Receive cash for adventure race 16 Salaries Expense 2,000 Cash 2,000 (Pay cash for salary)

31 Dividends 3,600 3,600 Cash (Pay cash for dividend) 31 No entry Requirement 2 Adjusting Entries December Depreciation Expense Accumulated Depreciation 31 7,300 7,300 (Adjust accumulated depreciation) Insurance Expense($450 * 6 months) 31 2,700 Prepaid Insurance (Adjust prepaid insurance) 2,700 Rent Expense($240 * 4months) 31 960 Prepaid Rent (Adjust prepaid rent) 960 Supplies Expense(Office)(1300-340) Supplies(Office) |(Adjust office supplies) 31 960 960 Interest Expense(33000*6%*5/12) Interest Payable (Adjust interest payable) 31 825 825 Supplies Expense(Racing)(2700-190) Supplies(Racing) |(Adjust racing supplies) 2,510 31 2,510 31 Income Tax Expense 14,900 Income Tax Payable (Adjust income tax payable) 14,900

Great Adventures, Inc, Adjusted Trial Balance December 31, 2018 Debit Accounts Credit Cash $ 105,680 Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Accounts Payable $ 2,700 $ 1,920 $ 340 190 $ 12,100 $ 23,400 $ $ 7,300 2,700 14,900 $ $ Income Tax Payable Interest Payable Notes Payable 825 33,000 Deferred revenue $ $ Common Stock 35,000 $ Dividends 3,600 Service Revenue (Clinic) $ 65,650 Service Revenue (Racing) $ 26,400 Advertising Expense Depreciation Expense $ 1,090 $ 7,300 $ 14,900 Income Tax Expense $ Insurance Expense 2,700 $ Interest Expense 825 $ Legal Fees Expense Miscellaneous Expense Rent Expense Salaries Expense 1,500 $ 1,100 $ $ 960 2,000 Supplies Expense (Office) Supplies Expense (Racing) $ 960 $ 2,510 $ 185,775 $ 185,775 Totals

Great Adventures, Inc Income Statement For the period ended December 31, 2018 Revenues: $ Service Revenue (Clinic) Service Revenue (Racing) 65,650 26,400 $ Total Revenues 92,050 Expenses: Advertising Expense Depreciation Expense Income Tax Expense 1,090 7,300 14,900 2,700 Insurance Expense Interest Expense 825 Legal Fees Expense Miscellaneous Expense 1,500 1,100 Rent Expense Salaries Expense Supplies Expense (Office) Supplies Expense (Racing) Total Expenses 960 2,000 960 2,510 35,845 $ Net Income 56,205

Great Adventures, Inc. Statement of Stockholders's Equity For the period ended December 31, 2018 Retained Earnings Total Stockholder's Equity Common Stock Balance at July 1 $ $ Issuance of common stock 35,000 56,205 (3,600) 87,605 35,000 $ $ Add: Net income for 2018 Less: Dividends 56,205 (3,600) 52,605 $ Balance at December 31 $ 35,000 $ $ S