Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such

image text in transcribed
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they'll hold their first adventure races. These races will involve four person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes course for outdoor enthusiasts. 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 31,000 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 $15,5ee of common stock to Suzie. Jul. 1 Sell $15,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $5,280 (5440 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,600 associated with incorporation. Jul. 7 Pay for advertising of $220 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 18 mountain bikes, paying $15,900 cash. Jul. 15 on the day of the clinic, Great Adventures receives cash of $2,800 fron 70 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 $3,100. Jul. 24 Pay 5730 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on Jul. 30 Great Adventures receives cash of $6,600 in advance from 6 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $35,000 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 64 annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, paying $23,800 cash. Aug. 10 Twenty additional kayakers pay $3,260 ($160 each), in addition to the $6,600 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 $10,800 cash. Aug. 24 Office supplies of $1,400 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 $3,840 (5328 per month in advance. Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14.400 cash. oct. 17 Tony conducts an orienteering clinic. Participants practice how to understand a topographical sap, read an altimeter, use a compass, and orient through heavily wooded areas. The company receives $18,100 cash. Dec. 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 vins. The entry fee for each team is $788. Dec. 5 To help organize and pronote the race. Tony hires his college roommate, Victor. Victor will be paid $60 in salary for each tean that competes in the race. His salary will be paid after the race. Dec. 8 The company pays $1,400 to purchase a permit from a state park where the race will be held. The amount is 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 Dec. 15 The company receives $28,000 cash from a total of forty teams, and the race is held. Dec. 16 The conpany pays Victor's salary of $2,400. Dec. 31 The company pays a dividend of $3,600 (51,890 to Tony and $1,800 to Suzie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $5,200. 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. 1. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $7.940. c. Four months of the one-year rental agreement purchased on September 1 has expired. d. Of the $1.400 of office supplies purchased on July 4, $230 remains. e Interest expense on the $35.000 loan obtained from the city council on August 1 should be recorded. 1 of the $2,400 of racing supplies purchased on December 12. $210 remains g. Suzie calculates that the company owes $13,400 in income taxes. 1 Requirement General Journal General Ledger Thal Balance Income Statement Statement of SE Balance Sheet 1. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 27). Review the 'General Ledger' and the Trial Balance' tabs to see the effect of the transactions on the account balances. 2. Record the adjusting entries in the 'General Journal tab (these are shown as items 28-34)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Principles

Authors: Howard F. Stettler

3rd Edition

0130521183, 9780130521187

More Books

Students also viewed these Accounting questions