Tony and Suzie graduate from college in May 2024 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, 2024, Tony and Suzie organize their new company as a corporation, Great Adventures Incorporated The articles of incorporation state that the corporation will sell 37,000 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 business activities occur during July for Great Adventures. July 1 July 1 July 1 July 2 July 4 July 7 July 8. July 15 July 22 July 241 July 30 Sell $18,500 of common stock to Suzie. Sell $18,500 of common stock to Tony. Purchase a one-year insurance policy for $5,640 ($470 per month) to cover injuries to participants during outdoor clinics. Pay legal fees of $1,300 associated with incorporation. Purchase office supplies of $1,700 on account. Pay $210 to a local newspaper for advertising to appear immediately for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $50 the day of the clinic. Purchase 10 mountain bikes, paying $12,000 cash. On the day of the clinic, Great Adventures receives cash of $2,000 in total from 40 bikers. Tony and Suzie conducts the mountain biking clinic. Because of the success of the first mountain biking clinic, Tony and Suzie holds another mountain biking clinic and the company receives $2,500. Pay $720 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. Great Adventures receives total cash of $8,800 in advance from 80 kayakers for the upcoming kayak clinic. The following transactions occur over the remainder of 2024. August 1 August 4 August 10 August 17 August 24 Great Adventures obtains a $39,000 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. The company purchases 14 kayaks, paying $18,000 cash. Tony and Suzie conduct the first kayak clinic. In addition to the $8,800 that was received in advance from kayakers on July 30, the company receives additional cash of $3,200 from twenty new kayakers on the day of the clinic. Tony and Suzie conducts a second kayak clinic, and the company receives $12,400 cash. Office supplies of $1,700 purchased on July 4 are paid in full. September 1 To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed for one year, paying $3,720 ($310 per month) in advance. September 21 Tony and Suzie conduct a rock-climbing clinic. The company receives $13,600 cash. October 17 Tony and Suzie conduct 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 $18,000 cash. December 1 Tony and Suzie decide 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 $620. December 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $30 in salary for each team that competes in the race. His salary will be paid after the December 8 December 12 December 15 December 16 December 31 December 31 race. The company pays $1,100 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense. 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. The company receives $24,800 cash from a total of forty teams, and the race is held. The company pays Victor's salary of $1,200. The company pays a dividend of $4,300 ($2,150 to Tony and $2,150 to Suzie). Using his personal money, Tony purchases a diamond ring for $5,000. 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, 2024. a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,900. b. Six months' of the one-year insurance policy purchased on July 1 has expired. c. Four months of the one-year rental agreement purchased on September 1 has expired. d. Of the $1,700 of office supplies purchased on July 4, $260 remains. e. Interest expense on the $39,000 loan obtained from the city council on August 1 should be recorded. f. Of the $2,400 of racing supplies purchased on December 12, $270 remains. g. Suzie calculates that the company owes $14,100 in income taxes. 3. Post transactions from July 1 through December 31 and adjusting and closing entries on December 31 to T-accounts. 7. Post the closing entries of retained earnings to the T-account. Cash Prepaid Insurance Debit Beginning Balance July 11 July 11 Credit Debit Credit Beginning Balance 18,500 18,500 5,640 July 1 July 11 5,640 2,820 December 31 1,300 July 2 July 15 2,000 210 July 7 July 22 2,500 12,000 July 8 July 30 8,800 720 July 24 August 1 39,000 18,000 August 4 August 101 3.200 1,700 August 24 August 17 12,400 3,720 September 1 Ending Balance 2,820 September 21 13,600 1,100 December 8 October 17 18,000 1,200 December 16 December 15 24,800 4,300 December 31 Ending Balance 111,410 Prepaid Rent Supplies (Office) Debit Credit Debit Credit Beginning Balance Beginning Balance September 1 3,720 December 31 July 4 1,440 1,440 December 31 Ending Balance 3,720 Ending Balance 0 Required information Debit Beginning Balance December 12 Ending Balance Supplies (Racing) Credit Debit Beginning Balance: 2,400 December 31 July 8 2,400 Ending Balance Equipment (Bikes) 12,000 Credit 12,000 Equipment (Kayaks) Accumulated Depreciation Debit Credit Debit Credit Beginning Balance Beginning Balance August 4 Ending Balance 18,000 18,000 Ending Balance December 31 Accounts Payable Debit Credit Deferred Revenue Debit Credit 1,700 1,700 July 4 Beginning Balance August 10 July 30 2.400 December 12 2,400 Ending Balance Beginning Balance August 24 Ending Balance Debit Interest Payable Credit < Prev 3 4 85 7 of 7 Income Tax Payable Debit Credit Next > Beginning Balance Ending Balance Interest Payable Debit Credit Debit Beginning Balance 4,300 December 31 4,300 Ending Balance Notes Payable Debit Credit Income Tax Payable 0 Credit December 31 Common Stock Debit Credit Beginning Balance Beginning Balance 39,000 August 1 Ending Balance 39,000 Ending Balance July 1 July 1 0 Retained Earnings Debit Credit Beginning Balance December 31 Dividends Debit Credit December 31 Beginning Balance December 31 Closing entry December 31 Ending Balance 0 Service Revenue (Clinic) Ending Balance Service Revenue (Racing) Required information Service Revenue (Clinic) Beginning Balance Closing entry Ending Balance Debit Credit 57,300 2,000 July 15 2,500 July 22 0 8,800 August 10 12,400 August 17 13,600 September 21 18,000 October 171 Service Revenue (Racing) Debit Beginning Balance Closing entry Ending Balance 0 Credit December 15 Advertising Expense Legal Fees Expense Debit Credit Debit Credit Beginning Balance Beginning Balance July 7 210 930 Closing entry July 2 Closing entry July 24 720 Ending Balance 0 Ending Balance Beginning Balance December 8 Debit Miscellaneous Expense Salaries Expense Credit Debit Credit 1,100 1,100 Closing entry Beginning Balance December 16 Closing entry Required information Beginning Balance December 31 Ending Balance Beginning Balance December 31 Ending Balance Depreciation Expense Debit Credit Debit Beginning Balance 8,900 8.900 Closing entry December 311 0 Ending Balance Rent Expense Debit Credit Debit Beginning Balance 1,240) 1,240 Closing entry December 31 0 Ending Balance Insurance Expense Credit 2,820 2,820 Closing entry 0 Supplies Expense (Office) Supplies Expense (Racing) Debit Credit Beginning Balance December 31 Interest Expense Debit 2,130 2,130 Closing entry Beginning Balance December 31 Ending Balance 0 Ending Balance 0 Debit Beginning Balance Income Tax Expense Credit + Credit Closing entry Credit Closing entry