Tony and Suzie graduate from college in May 2018 and begin developing their new
ID: 2585439 • Letter: T
Question
Tony and Suzie graduate from college in May 2018 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, 2018, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 33,000 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 $16,500 of common stock to Suzie. Jul. 1 Sell $16,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $5,880 ($490 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,800 associated with incorporation. Jul. 4 Purchase office supplies of $1,700 on account. Jul. 7 Pay for advertising of $390 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $70 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $13,700 cash. Jul. 15 On the day of the clinic, Great Adventures receives cash of $3,500 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 $3,900. Jul. 24 Pay for advertising of $920 to a local radio station for a kayaking clinic to be held on August 10. Attendees can pay $150 in advance or $200 on the day of the clinic. Jul. 30 Great Adventures receives cash of $12,000 in advance from 80 kayakers for the upcoming kayak clinic. Aug. 1 Great Adventures obtains a $37,000 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 $19,800 cash. Aug. 10 Twenty additional kayakers pay $4,000 ($200 each), in addition to the $12,000 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 $11,100 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 $4,080 ($340 per month). Sep. 21 Tony conducts a rock-climbing clinic. The company receives $14,800 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 $17,900 cash. Dec. 1 Tony 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 wins. The entry fee for each team is $680. 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 $1,300 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 $2,800 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 $27,200 cash from a total of forty teams, and the race is held. Dec. 16 The company pays Victor’s salary of $2,000. 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 $3,500. 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, 2018. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $6,700. Six months’ worth of insurance has expired. Four months’ worth of rent has expired. Of the $1,700 of office supplies purchased on July 4, $200 remains. Interest expense on the $37,000 loan obtained from the city council on August 1 should be recorded. Of the $2,800 of racing supplies purchased on December 12, $290 remains. Suzie calculates that the company owes $14,100 in income taxes.
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).
Here is what i gott, but i think it is wrong, please help:
No Date General Journal Debit Credit 1 Jul 01, 2018 Cash 16,500 1 Common stock 16,500 2 Jul 01, 2018 Cash 16,500 2 Common stock 16,500 3 Jul 01, 2018 Prepaid insurance 5,880 3 Cash 5,880 4 Jul 02, 2018 Legal fees expense 1,800 4 Cash 1,800 5 Jul 04, 2018 Supplies (Office) 1,700 5 Accounts payable 1,700 6 Jul 07, 2018 Advertising expense 390 6 Cash 390 7 Jul 08, 2018 Equipment (Bikes) 13,700 7 Cash 13,700 8 Jul 15, 2018 Cash 3,500 8 Service revenue (Clinic) 3,500 9 Jul 22, 2018 Cash 3,900 9 Service revenue (Clinic) 3,900 10 Jul 24, 2018 Advertising expense 920 10 Cash 920 11 Jul 30, 2018 Cash 12,000 11 Deferred revenue 12,000 12 Aug 01, 2018 Cash 37,000 12 Notes payable 37,000 13 Aug 04, 2018 Equipment (Kayaks) 19,800 13 Cash 19,800 14 Aug 10, 2018 Cash 4,000 14 Deferred revenue 12,000 14 Service revenue (Clinic) 16,000 15 Aug 17, 2018 Cash 11,100 15 Service revenue (Clinic) 11,100 16 Aug 24, 2018 Accounts payable 1,700 16 Cash 1,700 17 Sep 01, 2018 Rent expense 1,360 17 Prepaid rent 2,720 17 Cash 4,080 18 Sep 21, 2018 Cash 14,800 18 Service revenue (Clinic) 14,800 19 Oct 17, 2018 Cash 17,900 19 Service revenue (Clinic) 17,900 20 Dec 01, 2018 No journal entry required 21 Dec 05, 2018 No journal entry required 22 Dec 08, 2018 Miscellaneous expense 1,300 22 Cash 1,300 23 Dec 12, 2018 Supplies expense (Racing) 2,800 23 Cash 2,800 24 Dec 15, 2018 Cash 27,200 24 Service revenue (Racing) 27,200 25 Dec 16, 2018 Salaries expense 2,000 25 Cash 2,000 26 Dec 31, 2018 Dividends 3,900 26 Cash 3,900 27 Dec 31, 2018 No journal entry required 28 Dec 31, 2018 Depreciation expense 6,700 28 Equipment (Kayaks) 6,700 29 Dec 31, 2018 Insurance expense 2,940 29 Prepaid insurance 2,940 30 Dec 31, 2018 Rent expense 1,500 30 Prepaid rent 1,500 31 Dec 31, 2018 Supplies expense (Office) 1,500 31 Supplies (Office) 1,500 34 Dec 31, 2018 Income tax expense 14,100 34 Cash 14,100Explanation / Answer
TRIAL BALANCE Unadjusted
Adjustments
Adjusted balances
Accounts
Dr
Cr
Dr
Cr
Common Stock
28000
-28000
Profit and Loss
0
Accounts Payables
8300
11200
-2900
Depreciation expense
6640
6640
Interest Expense
32000
32000
Interest payable
32000
-32000
Accumulated Depreciation
6640
-6640
Loan
32000
-32000
Supplies Exp
3640
3640
Mountain Bikes
16300
16300
Supplies
4000
3640
360
Cash
143650
53510
90140
Rent Expense
1480
1480
Insurance Expense
2100
2100
Legal Fees
1700
1700
Kayaks
16900
16900
Prepaid Rent
2960
2960
Miscellaneous exp
1700
1700
Dividend
3800
3800
Income Tax
13300
13300
Income Tax payable
13300
-13300
Services Revenue a/c
83650
-83650
Prepaid Insurance
2100
2100
Advertisement
970
970
Salaries and wages
2400
2400
TOTAL
208360
208360
55580
55580
0
* Note : Negative balances above denote CREDIT BALANCES
Income Statement
Revenue from Operation
Service revenue
83650
TOTAL
83650
Expenses
Advertisement
970
Supplies exp
3640
Depreciation expense
6640
Misc Exp
1700
Legal Fees
1700
Rent Expense
1480
Insurance Expense
2100
Salaries and wages
2400
Interest Exp
32000
Income Tax
13300
TOTAL
65930
Net Income
17720
Statement of Retained earning
Opening balance
Net Income
17720
(-) Dividend paid
-3800
Closing
13920
Balance Sheet
A. Equity and Liabilities
Amount
1. Shareholders' equity
Common Stock
28000
2. Reserve and Surplus
Retained Earning
13920
3. Current Liabilities
Accounts payables
2900
Interest payable
32000
Loan
32000
Income Tax payable
13300
TOTAL
122120
B. Assets
1. Non Current Assets
Kayaks
16900
Mountain Bikes
16300
Accumulated Depreciation
-6640
26560
2. Current Assets
Supplies
360
Prepaid Rent
2960
Prepaid Insurance
2100
Cash & Cash equivalent
90140
95560
TOTAL
122120
TRIAL BALANCE Unadjusted
Adjustments
Adjusted balances
Accounts
Dr
Cr
Dr
Cr
Common Stock
28000
-28000
Profit and Loss
0
Accounts Payables
8300
11200
-2900
Depreciation expense
6640
6640
Interest Expense
32000
32000
Interest payable
32000
-32000
Accumulated Depreciation
6640
-6640
Loan
32000
-32000
Supplies Exp
3640
3640
Mountain Bikes
16300
16300
Supplies
4000
3640
360
Cash
143650
53510
90140
Rent Expense
1480
1480
Insurance Expense
2100
2100
Legal Fees
1700
1700
Kayaks
16900
16900
Prepaid Rent
2960
2960
Miscellaneous exp
1700
1700
Dividend
3800
3800
Income Tax
13300
13300
Income Tax payable
13300
-13300
Services Revenue a/c
83650
-83650
Prepaid Insurance
2100
2100
Advertisement
970
970
Salaries and wages
2400
2400
TOTAL
208360
208360
55580
55580
0
* Note : Negative balances above denote CREDIT BALANCES