Question

Tony and Suzie are ready to expand Great Adventures even further in 2022. 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 4% 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 $4,400 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 $2,900, but he wants to encourage kids to exercise more and enjoy the outdoors so he charges the group only $2,400. Great Adventures provides these services on account.
Feb.		28		The Boy Scout troop pays the full amount owed, less the 4% 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 $3,400, and Reynold’s agrees to pay within 30 days.
Mar.		27		Reynold’s pays the full amount owed, less the 4% quick-payment discount.
Apr.		7		Several men from the Elks Lodge decide to participate in a TEAM adventure. They pay $6,900, and the event is scheduled for the following week.
Apr.		14		The TEAM adventure is held for members of the Elks Lodge.
Apr.		30		Myers Manufacturing participates in a TEAM adventure. Great Adventures provides services on account for $5,400, and Myers agrees to pay within 30 days.
May		31		Myers Manufacturing fails to pay the amount owed within the specified period and agrees to sign a three-month, 7% note receivable to replace the existing account receivable.
Jun.		15		Several MBA groups participate in TEAM adventures. Great Adventures provides services on account for $21,000 to these groups, with payment due in July.

Great Adventures Problem AP5-1 Part 2

2. Consider the following information as of June 30, 2022.

1. Suzie estimates uncollectible accounts to be 8% of accounts receivable (which does not include the $5,400 note receivable from Myers Manufacturing). Prepare the adjusting entry for uncollectible accounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

2. Accrue one month of interest on the note receivable from Myers Manufacturing. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer to Part 2: Since the Part 2 is specifically provided and no Part 1 question to post all transactions is mentioned, only the Part 2 is answered.

Great Adventures Problem AP5-1 Part 2

1. Consider the following information as of June 30, 2022.

a. Suzie estimates uncollectible accounts to be 8% of accounts receivable (which does not include the $5,400 note receivable from Myers Manufacturing). Prepare the adjusting entry for uncollectible accounts.

Answer:

Date	Account title	Debit	Credit
Jun. 30	Bad Debt Expense	1,680
	Allowance for Uncollectible Accounts		1,680
	To record bad debts

Calculation:

The estimated uncollectible accounts = 8% of accounts receivable

On June 15, Great Adventures provided services on account for $21,000 with payment due in July.

So the Accounts receivable = 21,000

So Bad Debt Expense = 21,000 x 8% = 1,680

Here 1,680 will be treated as uncollectible accounts,so we need to debit the bad debt expense as the bad debt expense increases and credit the Allowance for Uncollectible Accounts

b. Accrue one month of interest on the note receivable from Myers Manufacturing.

Answer:

Date	Account title	Debit	Credit
Jun. 30	Interest Receivable	31.50
	Interest Revenue		31.50
	To record accrued interest for 1 month

Calculation:

Here we need to accrue one month of interest on the note receivable from Myers Manufacturing.

Notes receivable = 5,400

Interest rate = 7%

So the Interest for one month = $5,400 x 7% x 1/12 = $31.50

It is the interest that has occurred, but not been received yet.  We need to post the adjusting entry with debit Interest Receivable which is a current asset and credit Interest Revenue. So here adjusting entry will debit Interest Receivable for $31.50, and will credit Interest Revenue for $31.50.