Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation
On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 36,000 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.
Jul. | 1 | Sell $18,000 of common stock to Suzie. | ||
Jul. | 1 | Sell $18,000 of common stock to Tony. | ||
Jul. | 1 | Purchase a one-year insurance policy for $4,080 ($340 per month) to cover injuries to participants during outdoor clinics. | ||
Jul. | 2 | Pay legal fees of $1,600 associated with incorporation. | ||
Jul. | 4 | Purchase office supplies of $1,500 on account. | ||
Jul. | 7 | Pay for advertising of $260 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 $16,600 cash. | ||
Jul. | 15 | On the day of the clinic, Great Adventures receives cash of $2,000 from 50 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 $2,450. | ||
Jul. | 24 | Pay $670 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $110 in advance or $160 on the day of the clinic. | ||
Jul. | 30 | Great Adventures receives cash of $8,800 in advance from 80 kayakers for the upcoming kayak clinic. | ||
Aug. | 1 | Great Adventures obtains a $34,000 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 $15,400 cash. | ||
Aug. | 10 | Twenty additional kayakers pay $3,200 ($160 each), in addition to the $8,800 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 $11,400 cash. | ||
Aug. | 24 | Office supplies of $1,500 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 for one year, paying $3,000 ($250 per month) in advance. | ||
Sep. | 21 | Tony conducts a rock-climbing clinic. The company receives $13,600 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 $18,300 cash. | ||
Dec. | 1 | Tony decides to hold the companys 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 $650. | ||
Dec. | 5 | 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. | ||
Dec. | 8 | The company pays $1,000 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 $2,400 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 $26,000 cash from a total of forty teams, and the race is held. | ||
Dec. | 16 | The company pays Victors salary of $2,400. | ||
Dec. | 31 | The company pays a dividend of $3,900 ($1,950 to Tony and $1,950 to Suzie). | ||
Dec. | 31 | Using his personal money, Tony purchases a diamond ring for $5,300. 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, 2021.
- Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,800.
- Six months of the one-year insurance policy purchased on July 1 has expired.
- Four months of the one-year rental agreement purchased on September 1 has expired.
- Of the $1,500 of office supplies purchased on July 4, $220 remains.
- Interest expense on the $34,000 loan obtained from the city council on August 1 should be recorded.
- Of the $2,400 of racing supplies purchased on December 12, $130 remains.
- Suzie calculates that the company owes $13,900 in income taxes.
- Prepare an adjusted trial balance as of December 31, 2021.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started