Question

In: Accounting

Tony and Suzie are ready to expand Great Adventures even further in 2022. Tony believes that...

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 5% 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 $5,000 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 $3,500, but he wants to encourage kids to exercise more and enjoy the outdoors so he charges the group only $3,000. Great Adventures provides these services on account.
Feb. 28 The Boy Scout troop pays the full amount owed, less the 5% 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 $4,000, and Reynold’s agrees to pay within 30 days.
Mar. 27 Reynold’s pays the full amount owed, less the 5% quick-payment discount.
Apr. 7 Several men from the Elks Lodge decide to participate in a TEAM adventure. They pay $7,500, 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 $6,000, 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, 8% note receivable to replace the existing account receivable.
Jun. 15 Several MBA groups participate in TEAM adventures. Great Adventures provides services on account for $24,000 to these groups, with payment due in July.
  1. Consider the following information as of June 30, 2022.
  1. Suzie estimates uncollectible accounts to be 10% of accounts receivable (which does not include the $6,000 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.)

Solutions

Expert Solution

Great Adventures, Inc.
Journal entries
No. Date Account Debit Credit Calculation
1 24-Jan Equipment $        5,000
Cash $        5,000
2 25-Feb Accounts Receivable $        3,000
Service Revenue $        3,000
3 28-Feb Cash $        2,850
Sales Discounts $           150 3,000*5%
Accounts Receivable $        3,000
4 19-Mar Accounts Receivable $        4,000
Service Revenue $        4,000
5 27-Mar Cash $        3,800
Sales Discounts $           200 4,000*5%
Accounts Receivable $        4,000
6 7-Apr Cash $        7,500
Deferred Revenue $        7,500
7 14-Apr Deferred Revenue $        7,500
Service Revenue $        7,500
8 30-Apr Accounts Receivable $        6,000
Service Revenue $        6,000
9 31-May Notes Receivable $        6,000
Accounts Receivable $        6,000
10 15-Jun Accounts Receivable $     24,000
Service Revenue $     24,000
Adjusting entries
11 30-Jun Bad Debt Expense $        2,400 24,000*10%
Allowance for Uncollectible Accounts $        2,400
12 30-Jun Interest Receivable $              40 6,000*8%*1/12
Interest Revenue $              40

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