Great Adventures obtains a $42,000 low-interest loan for the company from the ci
ID: 2425809 • Letter: G
Question
Great Adventures obtains a $42,000 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.
Twenty additional kayakers pay $3,400 ($170 each), in addition to the $8,400 that was paid in advance on July 30, on the day of the clinic. Tony conducts the first kayak clinic.
To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed, purchasing a one-year rental policy for $3,240 ($270 per month).
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. Clinic fees total $19,800.
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 $640.
To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $60 in salary for each team that competes in the race. His salary will be paid after the race.
The company purchases racing supplies for $2,600 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.
Using his personal money, Tony purchases a diamond ring for $4,100. Tony surprises Suzie by proposing that they get married. Suzie accepts!
Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,700.
1. Record transactions from August 1 through December 31
2. Record adjusting entries as of December 31, 2015
The following transactions occur over the remainder of the year.Explanation / Answer
JOURNAL In the Books of Great Adventures as on Dec 31 Month Date Particulars Debit $ Credit $ Aug. 1 city council a/c..........Dr 42,000 To Loan from City Council 42,000 (Being 6% Loan from city council) Aug. 4 Kayaks a/c .........Dr 23,400 To Cash 23,400 (Being Purchase of 14 Kayaks) Aug. 10 Operational expenses a/c........ Dr 11,800 To Cash 3,400 To Advance 8,400 (Being the Kayakers expenses) Aug. 17 Cash a/c ..........Dr 12,200 To Service revenue 12,200 (Beinb the revenue from 2nd Kayak clinic) Aug. 24 Office Supplie a/c .....Dr 1,600 To Cash 1,600 (Being Purchase of Office Supplies) Sep. 1 Rent a/c .......Dr 270 To Cash 270 (Being store room rent fo Sep) Sep. 21 Cash a/c ..........Dr 14,300 To Service revenue 14,300 (Beinb the revenue from rock-climbing clinic) Oct. 1 Rent a/c .......Dr 270 To Cash 270 (Being store room rent fo Oct) Oct. 17 Cash a/c ..........Dr 19,800 To Service revenue 19,800 (Beinb the revenue from orienteering clinic) Nov. 1 Rent a/c .......Dr 270 To Cash 270 (Being store room rent fo Nov) Dec. 1 Rent a/c .......Dr 270 To Cash 270 (Being store room rent fo Dec) Dec. 8 miscellaneous expense a/c .......Dr 1,500 To Cash 1,500 (Being paid towards permit) Dec. 12 Sales Promotion expenses a/c .....Dr To Cash (Being Purchase of Dec. 15 Cash a/c ..........Dr 25,600 To Race Revenue 25,600 (Being the Race expenses $640*40) Dec. 16 Salary a/c ........Dr 2,400 To Cash 2,400 (Being the Victor's Salary ) Dec. 31 Dividend a/c...........Dr 3,800 To Dividend Payable 3,800 (Being the dividend payable $1,900 to Tony and $1,900 to Suzie)
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