Question

Tony and Suzie are ready to expand Great Adventures even further in 2019. Tony believes that many groups in the community (for example, Boy Scouts, church groups, civic groups, and local businesses) would like to hold one-day outings for their members. Groups would engage in outdoor activities such as rock climbing, fishing, capture the flag, paintball, treasure hunts, scavenger hunts, nature hikes, and so on. The purpose of these one-day events would be for each member of the group to learn the importance of TEAM (Together Everyone Achieves More).

Tony knows that most people are not familiar with these types of activities, so to encourage business he allows groups to participate in the event before paying. He offers a 6% quick-payment discount to those that pay within 10 days after the event. He also guarantees that at least eight hours of outdoor activities will be provided or the customer will receive a 20% discount. For the first six months of the year, the following activities occur for TEAM operations.

Jan. 24   Great Adventures purchases outdoor gear such as ropes, helmets, harnesses, compasses, and other miscellaneous equipment for $4,300 cash.
Feb. 25   Mr. Kendall’s Boy Scout troop participates in a one-day TEAM adventure. Normally, Tony would charge a group of this size $2,800, but he wants to encourage kids to exercise more and enjoy the outdoors so he charges the group only $2,300. Great Adventures provides these services on account.
Feb. 28   The Boy Scout troop pays the full amount owed, less the 6% quick-payment discount.
Mar. 19   Reynold’s Management has its employees participate in a one-day TEAM adventure. Great Adventures provides services on account for $3,300, and Reynold’s agrees to pay within 30 days
Mar. 27   Reynold’s pays the full amount owed, less the 6% quick-payment discount.
Apr. 7   Several men from the Elks Lodge decide to participate in a TEAM adventure. They pay $6,800, and the event is scheduled for the following week.
Apr. 14   The TEAM adventure is held for members of the Elks Lodge.
May. 9   Myers Manufacturing participates in a TEAM adventure. Great Adventures provides services on account for $5,300, and Myers agrees to pay within 30 days.
Jun. 1−30   Several MBA groups participate in TEAM adventures during June. Great Adventures provides services on account for $20,500 to these groups, with payment due in July.
Jun. 30   Myers Manufacturing fails to pay the amount owed within the specified period and agrees to sign a three-month, 9% note receivable to replace the existing account receivable.

1. Record TEAM adventure transactions occurring during the first six months of 2019

As of June 30, 2019, Great Adventures finishes its first 12 months of operations. If Suzie wants to prepare financial statements, part of the process would involve allowing for uncollectible accounts receivable.

a. Suppose Suzie estimates uncollectible accounts to be 5% of accounts receivable (which does not include the $5,300 note receivable from Myers Manufacturing). Record the adjustment for uncollectible accounts on June 30, 2019.

Prepare a partial balance sheet showing the net accounts receivable section

Answer 1

1	Journal entries for TEAM adventure transactions occurred during the first six months of 2019
Date	General Journal	Debit	Credit
24-Jan	Equipments	$4,300
	Cash		$4,300
	(to record various equipment purchased on cash )
25-Feb	Accounts receivable	$2,300
	Service Discount	$500
	Service Revenue		$2,800
	(To record service provided to Mr. Kendall's Boy Scout)
28-Feb	Cash	$2,162
	Quick payment discount	$138
	Accounts receivable		$2,300
	(To record payment received from Mr. Kendall's Boy scout)
19-May	Accounts receivable	$3,300
	Service Revenue		$3,300
	(To record service provided to Reynold's management)
27-Mar	Cash	$3,102
	Quick payment discount	$198
	Accounts receivable		$3,300
	(To record payment received from Reynold's Management)
7-Apr	Accounts receivable	$6,800
	Unearned service revenue		$6,800
	(to record payment received from Elks lodge in advance)
14-Apr	Unearned service revenue	$6,800
	Service revenue		$6,800
	(to record adventure held for ELKs lodge)
9-May	Accounts receivable	$5,300
	Service Revenue		$5,300
	(To record service provided to Myers Manufacturing)
30-Jun	Accounts receivable	$20,500
	Service Revenue		$20,500
	(To record service provided to Several MBA groups)
30-Jun	Note Receivable	$5,300
	Accounts Receivable		$5,300
	(To record three months, 9% note signed by Myers manufacturing)
a	Adjustement for uncollectible accounts on June 30, 2019
	Bad debts	$1,025
	Allowance for doubtful debts		$1,025
	(to provide for 5% allowance for doubtful debts)
	(20500 x 5% = $1025)
	Partial balance sheet
	Accounts receivable	$20,500
	Less: Allowance for doubtful debts	$1,025	$19,475
	Note Receivable 9%, 3 months due		$5,300