Question
The following transactions occur over the remainder of the year. Aug. 1 Great Adventures obtains a $46,000 low-interest loan for the company from the city
The following transactions occur over the remainder of the year. |
Aug. | 1 | Great Adventures obtains a $46,000 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, costing $14,300. |
Aug. | 10 | Twenty additional kayakers pay $3,200 ($160 each), in addition to the $5,500 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 $11,400 cash. |
Aug. | 24 | Office supplies of $1,700 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 $3,720 ($310 per month). |
Sep. | 21 | Tony conducts a rock-climbing clinic. The company receives $14,200 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. Clinic fees total $19,700. |
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 $550. |
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 $1,700 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 $2,100 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 | Forty teams pay a total of $22,000 to race. The race is held. |
Dec. | 16 | The company pays Victors salary of $2,000. |
Dec. | 31 | The company pays a dividend of $3,800 ($1,900 to Tony and $1,900 to Suzie). |
Dec. | 31 | Using his personal money, Tony purchases a diamond ring for $4,400. Tony surprises Suzie by proposing that they get married. Suzie accepts! |
The following information relates to year-end adjusting entries as of December 31, 2015. |
a. | Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,800. |
b. | Six months worth of insurance has expired. |
c. | Four months worth of rent has expired. |
d. | Of the $1,700 of office supplies purchased on July 4, $360 remains. |
e. | Interest expense on the $46,000 loan obtained from the city council on August 1 should be recorded. |
f. | Of the $2,100 of racing supplies purchased on December 12, $230 remains. |
g. | Suzie calculates that the company owes $14,700 in income taxes. |
Assume the following ending balances for the month of July. |
Balance | ||
Cash | $ | 31,010 |
Prepaid insurance | 3,960 | |
Supplies (Office) | 1,700 | |
Equipment (Bikes) | 10,100 | |
Accounts payable | 1,700 | |
Unearned revenue | 5,500 | |
Common stock | 38,000 | |
Service revenue (Clinic) | 4,450 | |
Advertising expense | 980 | |
Legal fees expense | 1,900 | |
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