The following information relates to year-end adjusting entries as of December 3
ID: 2528481 • Letter: T
Question
The following information relates to year-end adjusting entries as of December 31, 2018.
a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,720.
b. Six months’ worth of insurance has expired.
c. Four months’ worth of rent has expired.
d. Of the $1,200 of office supplies purchased on July 4, $240 remains.
e. Interest expense on the $33,000 loan obtained from the city council on August 1 should be recorded.
f. Of the $2,800 of racing supplies purchased on December 12, $230 remains.
g. Suzie calculates that the company owes $14,200 in income taxes.
Requirement
Jul. 1 Sell $17,000 of common stock to Suzie. Jul. 1 Sell $17,000 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $5,520 ($460 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 $1,200 on account. Jul. 7 Pay for advertising of $380 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 $17,000 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $2,800 from 70 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 $3,350. Jul. 24 Pay for advertising of $880 to a local radio station for a kayaking clinic to be held on August 10. Attendees can pay $130 in advance or $180 on the day of the clinic. Jul. 30 Great Adventures receives cash of $6,500 in advance from 50 kayakers for the upcoming kayak clinic. On July 1, 2018, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 34,000 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 Ju. 1Sell $17,000 of common stock to Suzie Jul. 1Sell 517,000 of common stock to Tony Jul 1 Purchase a one-year insurance policy for $5,520 (5460 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 $1,200 on account. Jul 7 Pay for advertising of $380 to a local newspaper for an upcoming mountain biking clinic to be held Jul. Jul. on July 15. Attendees will be charged $40 on the day of the clinic. 8 Purchase 10 mountain bikes, paying $17,000 cash 15 On the day of the clinic, Great Adventures receives cash of $2,800 from 70 bikers. Tony conducts Jul 22 Because of the success of the first mountain biking clinic, Tony holds another mountain biking Jul 24 Pay for advertising of $880 to a local radio station for a kayaking clinic to be held on August 10 Jul. 30 Great Adventures receives cash of $6,500 in advance from 50 kayakers for the upcoming kayak Aug. 1 Great Adventures obtains a $33,000 low-interest loan for the company from the city council, which the mountain biking clinic. clinic and the company receives $3,350 Attendees can pay $130 in advance or $180 on the day of the clinic. clinic 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 $26,600 cash Aug. 10 Twenty additional kayakers pay $3,600 ($180 each), in addition to the $6,500 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 $10,900 cash Aug. 24 Office supplies of $1,200 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, purchasing a one-year rental policy for 54,680 ($390 per month). Sep. 21 Tony conducts a rock-climbing clinic. The company receives S14,500 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 S18,800 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 $630 Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor wll be paid $50 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 heldExplanation / Answer
1. In the books of Great Adventures Inc.
2. Adjusting Entries:
3. Great Adventures Inc.
Adjused Trial Balance
December 31, 2018
4. Great Adventures Inc.
Income Statement
For the year ended December 31, 2018
5. Great Adventures Inc.
Balance Sheet
December 31, 2018
Date Account Titles Debit Credit $ $ July 1 Cash 34,000 Common Stock 34,000 July 1 Prepaid Insurance 5,520 Cash 5,520 July 2 Legal Fees Expense 1,500 Cash 1,500 July 4 Office Supplies 1,200 Accounts Payable 1,200 July 7 Advertising Expense 380 Cash 380 July 8 Equipment : Bikes 17,000 Cash 17,000 July 15 Cash 2,800 Service Revenue 2,800 July 22 Cash 3,350 Service Revenue 3,350 July 24 Advertising Expense 880 Cash 880 July 30 Cash 6,500 Deferred Revenue 6,500 Aug 1 Cash 33,000 Note Payable 33,000 Aug 4 Equipment : Kayaks 26,600 Cash 26,600 Aug 10 Cash 3,600 Deferred Revenue 6,500 Service Revenue 10,100 Aug 17 Cash 10,900 Service Revenue 10,900 Aug 24 Accounts Payable 1,200 Cash 1,200 Sep 1 Prepaid Rent 4,680 Cash 4,680 Sep 21 Cash 14,500 Service Revenue 14,500 Oct 17 Cash 18,800 Service Revenue 18,800 Dec 1 No journal entry required 0 0 Dec 5 No journal entry required 0 0 Dec 8 Miscellaneous Expense 1,900 Cash 1,900 Dec 12 Racing Supplies 2,800 Accounts Payable 2,800 Dec 15 Cash 25,200 Service Revenue 25,200 Dec 16 Salaries Expense 2,000 Cash 2,000 Dec 31 Dividends 4,400 Cash 4,400Related Questions
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