IThe foowing information apples to the questions dispiayed below.j On July 1. 20
ID: 2537714 • Letter: I
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IThe foowing information apples to the questions dispiayed below.j On July 1. 2013. Tony and Suzie organize their new company as a corporation. Great Adventures Inc. The following transactions occur from August 1 through December 31. Also. the balances are provided for the month ended July 31 The aricles of Incorporation state that the corporation will sell 37,000 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 business activities occur during July for Great Adventures. Jul. 1 Sell $18.500 of common stock to Suzie Jul. 1 Sell $18.500 of common stock to Tony Jul. 1 Purchase a one-year insurance policy for $4.20($350 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1.200 associated with incorporation. Jul. 4 Purchase office supplies of $1.300 on account. Jul. 7 Pay for advertsing of S270 to a local newspaper for an upcoming mountaln biking clinic to be held on July 15. Attendees will be charged $60 the day of the clinic. Jul. 8 Purchase 10 mountain bikes, payling $18,100 cash. Jul, 15 On the day of the clinic. Great Adventures receives cash of S4.800 from 80 bikers. Tony conducts the mountain biking clinic. Jul. 22 Because of the success of the first mountain biking clinic. Tony holds another mountain biking cinic and the company receives $5.400. Jul. 24 Pay for advertsing of $690 to a local radio station for a kayaking clinic to be held on August 10. Attendees can pay $140 In advance or $190 on the dey of the clinic. Jul. 30 Great Adventures recelves cash of $7.000 In advance from 50 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains $44.000 lo interest loan for the company om the city counc1 which has recently passed an ritet e encouraging business development related to outdoor activities. The loan is due in three years and 6% annual Interest Is due each yeer on July 31 Aug. 4 The company purchases 14 kayaks, paying $15,400 cash. Aug. 10 Twenty additional kayakers pay $3.800 (S190 each), In addition to the $7000 that was pald 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 $1.300 purchased on July 4 are pald 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 S2.400($200 per month. Sep. 21 Tony conducts a rock-climbing clinic. The company recelves $14,000 cosh. Oct. 17 Tony conducts an orlenteering clinic. Particlpants practice how to understand a topographical map, read an altimeter, use a compass, and orlent through heavily wooded areas. The company recelves $19100 cash. Dec. 1 Tony decides to hold the company's first edventure race on December 15. Four-person teams will race from checkpoint to checkpoint using a combination of mountain blking. kayaking. orlenteering. tral running. and rock-climbing sklls. The first team in each category to complete all checkpolnts In order wins. The entry fee for each team Is $520.Dec. 5 To help organize and promote the roce, Tony hires his college roommate. Victor. Victor will be pald S40 In salary for each team that competes In the rece. His salary will be paid after the race Dec. 8 The company pays $1200 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 $2100 on account due In 30 days. Supplies Include trophles for the top-finishing teams In each category, promotional shirts, snack foods and drinks for participents, and field markers to prepare the racecourse Dec. 15 The company recelves $20,800 cash from a total of forty teams, and the race is held Dec. 16 The company pays Victor's selary of $1600. Dec. 31 The company pays a dvidend of $3,700 ($1,850 to Tony and S1.850 to Suzie. Dec. 31 Using his personal money, Tony purchases a dlamond ring for S3.600. 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, 2018. a. Depreclation of the mountaln bikes purchased on July 8 and kayaks purchased on August 4 totals $8,700. b. Six months worth of Insurance has explred. c. Four months worth of rent has explred. d. Of the $1,300 of office suppliles purchased on July 4, S360 remains. e. Interest expense on the $44,000 loan obtained from the clty council on August 1 should be recorded. f. Of the $2,100 of racing supplies purchased on December 12, $290 remalns. g. Suzle calculates that the company owes $13.200 In Income taxes. Assume the following ending balances for the month of July. Cosh Prepaid insurance Supplies (Office) Equipmen: (Bikes) Accounts payable Doferred rovenus Common stock Service revenue (Clinic) Advertising expense Legal fees expense Balance S 29740 4.200 1300 8.100 1,300 7,000 37000 10.200 960 1.200Explanation / Answer
Great Adventure Inc. General Journal Date Journal Amount (DR) Amount (CR) 1-Jul Cash $ 18,500.00 To Common Stock $ 18,500.00 (Being sell common stock to Suzie 1-Jul Cash $ 18,500.00 To Common Stock $ 18,500.00 (Being sell common stock to Tony) 1-Jul Prepaid Insurance $ 4,200.00 To Cash $ 4,200.00 (Being amount of Insurance purchased ) 2-Jul Legal Fees $ 1,200.00 To Cash $ 1,200.00 (Being amount of legal fees paid ) 4-Jul Office Supplies $ 1,300.00 To Accounts Payable $ 1,300.00 (Being amount of office supplies purchased on account) 7-Jul Advertisement Expenses $ 270.00 To Cash $ 270.00 (Being amount paid for advertisement in newspaper) 8-Jul Mountain Bikes $ 18,100.00 To Cash $ 18,100.00 (Being amount of purchased of 10 mountain bikes) 15-Jul Cash $ 4,800.00 To Service Revenue $ 4,800.00 (Being amount received from 80 Bikers) 22-Jul Cash $ 5,400.00 To Service Revenue $ 5,400.00 (Being amount received for service revenue 24-Jul Advertisement Expenses $ 690.00 To Cash $ 690.00 (Being amount paid for advertisement in Radio) 30-Jul Cash $ 9,100.00 To Unearned Service Revenue $ 9,100.00 (Being amount of advance received from 50 Kayakers for upcomin Kayak clinic) 1-Aug Cash $ 44,000.00 To Loan $ 44,000.00 (Being amount of loan taken from City Counsil) 4-Aug Equipments $ 15,400.00 To Cash $ 15,400.00 (Being amount paid for purchased of Kayaks) 10-Aug Cash $ 3,800.00 To Deferred Revenue $ 3,800.00 (Being amount received as advance from 20 Kayaks) 17-Aug Cash $ 10,900.00 To Service Revenue $ 10,900.00 (Being amount received as Service Revenue) 24-Aug Accounts Payable $ 1,300.00 to Cash $ 1,300.00 (Being amount paid for supplies purchased on account) 1-Sep Prepaid Rent $ 2,400.00 To Cash $ 2,400.00 (Being amount paid as rent for storage shed) 21-Sep Cash $ 14,000.00 To Service Revenue $ 14,000.00 (Being amount received as Service Revenue) 17-Oct Cash $ 19,100.00 To Service Revenue $ 19,100.00 (Being amount received as Service Revenue) 1-Dec No Entry 5-Dec No Entry 8-Dec Misc Expenses $ 1,200.00 To Cash $ 1,200.00 (Being amount paid for Permit) 12-Dec Racing Supplies $ 2,100.00 To Accounts Payable $ 2,100.00 (Being amount of office supplies purchased on account) 15-Dec Cash $ 20,800.00 To Service Revenue $ 20,800.00 (Being amount of cash received from 40 teams 16-Dec Salary(40*$40) $ 1,600.00 To Cash $ 1,600.00 (Being amount paid for victors salary) 31-Dec Dividend $ 3,700.00 To Cash $ 3,700.00 (Being amount of dividnd paid ) Adjusting Entries Date Particular Amount (Dr) Amount(Cr) 31-Dec Depreciation $ 8,700.00 To Mountain Bikes & Kayaks $ 8,700.00 (Being amount of Dep) 31-Dec Insurance =(350*6) $ 2,100.00 To Prepaid Insurance $ 2,100.00 (Being amount of 6 months insurance) 31-Dec Rent=($200*4) $ 800.00 To Prepaid Rent $ 800.00 (Being amount of 4 months rent) 31-Dec Office supplies Expenses=($1300-$360) $ 940.00 To Office Supplies $ 940.00 (Being amount of Office supplies Expenses) 31-Dec Interest Expenses=($44000*6%*5/12) $ 1,100.00 To Interest Payable $ 1,100.00 (Being amount of 5 months interest on loan @6%) 31-Dec Racing Supplies Expenses=($2100-$290) $ 1,810.00 To Recing Supplies $ 1,810.00 (Being amount of racing supplies expenses) 31-Dec Income Tax Expenses $ 13,200.00 To Income Tax Payable $ 13,200.00 (Being amount of Income tax Payable) Great Adventure Inc. Adjusted Trial Balance Trial Balnce Particular Amount (Dr) Amount (Cr) Cash= $ 112,640.00 Prepaid Insurance=($4200-$2100) $ 2,100.00 Supplies $ 360.00 Equipment=($18100+$15400) $ 33,500.00 Accounts Payable Deferred Revenue=($7000+$3800) $ 10,800.00 Common stock $ 37,000.00 Loan $ 42,000.00 Service Revenue=($10200+$10900+$14000+$19100+$20800) $ 75,000.00 Advertisement expenses $ 960.00 Legal fees expenses $ 1,200.00 Office Supplies expenses $ 940.00 Racing supplies expenses $ 1,810.00 Racing Supplies $ 290.00 Intt $ 1,100.00 Intt Payable $ 1,100.00 Income Tax $ 13,200.00 Income tax Payable $ 13,200.00 Rent $ 800.00 Prepaid Rent=($2400-$800) $ 1,600.00 Insurance=($4100-$2100) $ 2,100.00 Salary $ 1,600.00 Dividend $ 3,700.00 Depreciation $ 8,700.00 Accumulated Depreciation $ 8,700.00 Misc Expense $ 1,200.00 Total $ 187,800.00 $ 187,800.00 Income Statement December 31st Service Revenue $ 75,000.00 Expenses Insurance $ 2,100.00 Rent $ 800.00 Advertisement $ 960.00 Salary $ 1,600.00 Legal fees $ 1,200.00 Misc $ 1,200.00 Accumulated Depreciation $ 8,700.00 Income tax $ 13,200.00 $ 29,760.00 Net Income $ 45,240.00 Less: dividend $ 3,700.00 Retained Earnings $ 41,540.00
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