Moira and Johnny graduate from college in May 2020 and begin developing their new business. They begin by offering clinics for basic acting skills such as improv or dramatic reading. Upon developing a customer base, they’ll hold their acting retreat. These retreats will involve four-person teams that put together plays, skits, etc. to perform at the end of the retreat. In the long run, they plan to sell stage makeup/costuming and develop an acting studio for blossoming talent.

On July 1, 2020, Moira and Johnny organize their new company as a corporation, The Crowening Inc. The articles of incorporation state that the corporation may sell 200,000 shares of common stock with a par value of $2. Each share of stock represents a unit of ownership. Moira and Johnny will act as co-presidents of the company. The following transactions occur from July 1 through December 31.

  

Jul.		1		Sell $10,000 of common stock to Johnny at par.
Jul.		1		Sell $10,000 of common stock to Moira at par.
Jul.		1		Purchase a one-year insurance policy for $3,360 ($280 per month) to cover injuries to participants from any bird-related accidents.
Jul.		2		Pay legal fees of $1,800 associated with incorporation.
Jul.		4		Issue an additional 5,000 shares of common stock to Moira in exchange for land worth $35,000.
Jul.		7		Sell 140,000 shares of common stock on the market for $30/each.
Jul.		8		To raise capital to fund the building of the acting studio, The Crowening issues $360,000 of 8%, 5-year bonds. They will pay interest quarterly. The market rate is 4%
Jul.		15		After the bond issuance, Johnny and Moira realize they won’t need all $360,000. They decide to use the excess ($60,000) to invest. They purchase $20,000 of short term trading securities and invest $40,000 in Ray’s Rags, a costuming company. Their investment in Ray’s represents a 40% ownership stake in the company.
Jul.		22		Moira runs her first acting clinic. She received $60,000 for the clinic, which cost her $12,000 to conduct. 70% of this $60,000 was received in cash, with the rest being on account, due in 6 months. NOTE: Use CASH for Cr. In COGS entry.
Jul.		24		Repurchase 32,000 shares of stock as treasury stock for $22/share.
Jul.		30		The Crowening receives $83,000 in advance for a clinic to be held on August 17.

Aug.	1		Declare a cash dividend of $0.32/share. The date of record will be August 15. Date of payment will be January 3.
Aug.	4		The company purchases acting props for $8,000 cash total.
Aug.	10		The company purchases lighting equipment on account for $18,000.
Aug.	17		Moira conducts her second acting clinic.
Aug.	24		Office supplies are purchased on account for $4,000.
Sep.	1		To provide better storage of equipment and costumes, the company rents a storage unit, purchasing a one-year rental policy for $3,660 ($305 per month).
Sep.	30		The Crowening pays its first bond interest payment.
Oct.	17		Ray’s Rags releases earnings for Q3. They report earnings of $1.1Million and declare a $3/share dividend. They have 100,000 shares of common stock outstanding.
Oct.	30		Ray’s Rags pays the cash dividend from October 17.
Nov.	8		Purchase a company car on installment for $50,000 with an interest rate of 4%. Agree to make monthly payments of $921 for the next 60 months, with the first payment due November 30.
Nov.	30		Make first car payment.
Dec.	1		Johnny sells $1,500 worth of lighting equipment for a profit of $3,000. Assume no impact on depreciation.
Dec.	5		Resell 10,000 shares of treasury stock for $26/share.
Dec.	12		Ray’s Rags has recently come under fire for insider trading. The Crowening sells off their investment for $0.65/share.
Dec.	16		The company declares a 20% stock dividend, distributable 12/31. Market price is $18/share.
Dec.	31		Distribute stock dividend.
Dec.	31		Pay second bond interest payment
Dec.	31		Pay monthly car payment

   

The following information relates to year-end adjusting entries as of December 31, 2020.

1. Depreciation of the lighting equipment and acting props totals $4,200.
2. Six months’ worth of insurance has expired.
3. Four months’ worth of rent has expired.
4. Of the office supplies purchased on August 24, $480 remains.
5. Johnny calculates that the company owes $6,000 in income taxes.
6. The short term trading securities are currently worth $18,000.                                                           

REQUIREMENTS:

1. Record each of the transactions listed above in the ‘General Journal’ tab, including the adjusting entries (these are shown as items 1-35). From those transactions, populate the ‘General Ledger’ and review the ‘Trial Balance’ tab to see the effect of the transactions on the account balances.