On July 1, 2018, Tony and Suzie organize their new company as a corporation, Gre
ID: 2544627 • Letter: O
Question
On July 1, 2018, 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.
Aug. 1 Great Adventures obtains a $30,000 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.
Aug. 4 The company purchases 14 kayaks, paying $28,000 cash.
Aug. 10 Twenty additional kayakers pay $3,000 ($150 each), in addition to the $4,000 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 $10,500 cash.
Aug. 24 Office supplies of $1,800 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 $2,400 ($200 per month).
Sep. 21 Tony conducts a rock-climbing clinic. The company receives $13,200 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 $17,900 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 $500.
Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will 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 $1,200 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 $2,800 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 $20,000 cash from a total of forty teams, and the race is held.
Dec. 16 The company pays Victor’s salary of $2,000.
Dec. 31 The company pays a dividend of $4,000 ($2,000 to Tony and $2,000 to Suzie).
Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,500. 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. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,000.
b. Six months’ worth of insurance has expired.
c. Four months’ worth of rent has expired.
d. Of the $1,800 of office supplies purchased on July 4, $300 remains.
e. Interest expense on the $30,000 loan obtained from the city council on August 1 should be recorded.
f. Of the $2,800 of racing supplies purchased on December 12, $200 remains.
g. Suzie calculates that the company owes $14,000 in income taxes.
Assume the following ending balances for the month of July.
#1) Record transactions from July 1 through December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2) Record adjusting entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
3) Post transactions from August 1 through December 31 and adjusting entries on December 31 to T-accounts. (Be sure to include beginning balances in the T-accounts.)
4) Prepare an adjusted trial balance as of December 31, 2018. (The items in the Trial Balance should be grouped as follows: Assets, Contra-asset accounts, Liabilities, Equity, Dividends, Revenues, and Expenses.)
5 -a) For the period July 1 to December 31, 2018, prepare an income statement.
5-b) For the period July 1 to December 31, 2018, prepare a statement of stockholders’ equity. All account balances on July 1 were zero.
5-c) Prepare a classified balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)
6)Record closing entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
7) Post the closing entries of retained earnings to the T-account.
8) Prepare a post-closing trial balance as of December 31, 2018.
#1) Record transactions from July 1 through December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2) Record adjusting entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
3) Post transactions from August 1 through December 31 and adjusting entries on December 31 to T-accounts. (Be sure to include beginning balances in the T-accounts.)
4) Prepare an adjusted trial balance as of December 31, 2018. (The items in the Trial Balance should be grouped as follows: Assets, Contra-asset accounts, Liabilities, Equity, Dividends, Revenues, and Expenses.)
5 -a) For the period July 1 to December 31, 2018, prepare an income statement.
5-b) For the period July 1 to December 31, 2018, prepare a statement of stockholders’ equity. All account balances on July 1 were zero.
5-c) Prepare a classified balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)
6)Record closing entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
7) Post the closing entries of retained earnings to the T-account.
8) Prepare a post-closing trial balance as of December 31, 2018.
Explanation / Answer
Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. Aug-01 Cash 30,000 Loan - Liability 31,000 Aug-04 Equipments Kayaks 28,000 Cash 12,000 Aug-10 Cash 3,000 Deferred Revenue 40,000 Service Revenue (Clinic) 43,000 Aug-17 Cash 10,500 Service Revenue (Clinic) 10,500 Aug-24 Accounts Payable 1,800 Cash 1,600 Sep-01 Prepaid Rent 2,400 Cash 2,400 21-Sep Cash 13,200 Service Revenue - Clinic 13,200 Oct-17 Cash Dr. 17,900 To service Revenue - Clinic 17,900 Dec-01 No Entry Dec-05 No Entry Dec-08 Misc Exp. 1,200 Cash 1,200 Dec-12 Supplies (Racing) 2,800 Accounts Payable 2,800 Dec-15 Cash 20,000 Service Revenue (Racing) 20,000 Dec-16 Salary 2,000 Cash 2,000 Dec-31 Dividend 4,000 Cash 4,000 Dec-31 No Entry - Personal Expenditure Not related to Buisness Answer 2. Journal Entry Adjusting Entry Date Particulars Dr. Amt. Cr. Amt. a Dep. Exp. 8,000 Accumulated Dep - Equip. 8,000 b Insurance Exp. 2,400 Prepaid Insurance 2,400 c Rent Exp. 800 Prepaid Rent 800 d Supplies Exp. 1,500 Supplies (Office) 1,500 e Interest Exp. 750 Interest Payable 750 f Supplies Exp. Dr. 2,600 To Supplies (Racing) 2,600 g Income Tax Expense Dr. 14,000 To Income Tax Payable 14,000 Answer 3. Cash Prepaid Insurance Beg. Bal 9,000.00 28,000.00 Aug-04 Beg. Bal 4,800.00 2,400.00 b Aug-01 30,000.00 1,800.00 Aug-24 Aug-10 3,000.00 2,400.00 Sep-01 Aug-17 10,500.00 1,200.00 Dec-08 21-Sep 13,200 2,000.00 Dec-16 Oct-17 17,900.00 4,000.00 Dec-31 Dec-15 20,000.00 End. Bal 64,200.00 End. Bal 2,400.00 Supplies (office) Equipment (Bikes) Beg. Bal 1,800.00 1,500.00 d Beg. Bal 12,000.00 End. Bal 300.00 End. Bal 12,000.00 Accounts Payable Deferred revenue Beg. Bal 1,800.00 Beg. Bal 4,000.00 Aug-24 1,800.00 2,800.00 Dec-12 Aug-10 4,000.00 End. Bal 2,800.00 End. Bal - Common Stock Service Revenue (Clinic) Beg. Bal 20,000.00 Beg. Bal 4,300.00 3,000.00 Aug-10 4,000.00 Aug-10 10,500.00 Aug-17 13,200 Sep-18 17,900.00 Oct-17 End. Bal 20,000.00 End. Bal 52,900.00 Advertising Exp. Legal fees Exp. Beg. Bal 1,000.00 Beg. Bal 1,500.00 End. Bal 1,000.00 End. Bal 1,500.00 Loan Liability Equipment - Kayaks Beg. Bal - Beg. Bal - 30,000.00 Aug-01 Aug-04 28,000.00 End. Bal 30,000.00 End. Bal 28,000.00 Prepaid rent Misc Exp. Beg. Bal - 800.00 c Beg. Bal - Sep-01 2,400.00 Dec-08 1,200.00 End. Bal. 1,600.00 End. Bal. 1,200.00 Supplies (Racing) Service Revenue (Racing) Beg. Bal - 2,600.00 f Beg. Bal - Dec-12 2,800.00 20,000.00 Dec-15 End. Bal. 200.00 End. Bal. 20,000.00 Salaries Exp. Dividends Beg. Bal - Beg. Bal - Dec-16 2,000.00 Dec-31 4,000.00 End. Bal. 2,000.00 End. Bal. 4,000.00 Dep. Exp. Accumulated Dep. - Equipments Beg. Bal - Beg. Bal - a 8,000.00 8,000.00 a End. Bal. 8,000.00 End. Bal. 8,000.00 Insurance Exp. Rent Exp. Beg. Bal - Beg. Bal - b 2,400.00 c 800.00 End. Bal. 2,400.00 End. Bal. 800.00 Supplies Exp. Interest Exp. Beg. Bal - Beg. Bal - d 1,500.00 e 750.00 f 2,600.00 End. Bal. 4,100.00 End. Bal. 750.00 Interest Payable Income Tax Exp. Beg. Bal - Beg. Bal - 750.00 e g 14,000.00 End. Bal. 750.00 End. Bal. 14,000.00 Income Tax Payable Beg. Bal - 14,000.00 g End. Bal. 14,000.00 Answer 4. Trial Balance As of Dec 31 Assets Cash 64,200.00 Prepaid Insurance 2,400.00 Supplies (office) 300.00 Equipment (Bikes) 12,000.00 Equipment - Kayaks 28,000.00 Prepaid rent 1,600.00 Supplies (Racing) 200.00 Accumulated Dep. - Equipments 8,000.00 Liabilities Accounts Payable 2,800.00 Loan Liability 30,000.00 Interest Payable 750.00 Income Tax Payable 14,000.00 Equity Common Stock 20,000.00 Dividends Dividends 4,000.00 Revenues Service Revenue (Clinic) 52,900.00 Service Revenue (Racing) 20,000.00 Expenses Advertising Exp. 1,000.00 Legal fees Exp. 1,500.00 Misc Exp. 1,200.00 Salaries Exp. 2,000.00 Dep. Exp. 8,000.00 Insurance Exp. 2,400.00 Rent Exp. 800.00 Supplies Exp. 4,100.00 Interest Exp. 750.00 Income Tax Exp. 14,000.00 Total 148,450.00 148,450.00
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