Question

On July 1, 2018, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The following transactions occur from August 1 through December 31. Also, the balances are provided for the month ended July 31.

  
Aug. 1 Great Adventures obtains a $30,000 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 $28,000 cash.
Aug. 10 Twenty additional kayakers pay $3,000 ($150 each), in addition to the $4,000 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 $10,500 cash.
Aug. 24 Office supplies of $1,800 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 $2,400 ($200 per month).
Sep. 21 Tony conducts a rock-climbing clinic. The company receives $13,200 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 $500.
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 $1,200 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 $20,000 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 $4,000 ($2,000 to Tony and $2,000 to Suzie).
Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,500. 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.
  
a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,000.
b. Six months’ worth of insurance has expired.
c. Four months’ worth of rent has expired.
d. Of the $1,800 of office supplies purchased on July 4, $300 remains.
e. Interest expense on the $30,000 loan obtained from the city council on August 1 should be recorded.
f. Of the $2,800 of racing supplies purchased on December 12, $200 remains.
g. Suzie calculates that the company owes $14,000 in income taxes.
  
Assume the following ending balances for the month of July.

	Balance
Cash	$	9,000
Prepaid insurance		4,800
Supplies (Office)		1,800
Equipment (Bikes)		12,000
Accounts payable		1,800
Deferred revenue		4,000
Common stock		20,000
Service revenue (Clinic)		4,300
Advertising expense		1,000
Legal fees expense		1,500
#1) Record transactions from July 1 through December 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2)  Record adjusting entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)    3)  Post transactions from August 1 through December 31 and adjusting entries on December 31 to T-accounts. (Be sure to include beginning balances in the T-accounts.)    4)  Prepare an adjusted trial balance as of December 31, 2018. (The items in the Trial Balance should be grouped as follows: Assets, Contra-asset accounts, Liabilities, Equity, Dividends, Revenues, and Expenses.)    5 -a)  For the period July 1 to December 31, 2018, prepare an income statement.    5-b) For the period July 1 to December 31, 2018, prepare a statement of stockholders’ equity. All account balances on July 1 were zero. 5-c) Prepare a classified balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)    6)Record closing entries as of December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 7) Post the closing entries of retained earnings to the T-account.    8) Prepare a post-closing trial balance as of December 31, 2018.

Answer 1

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
Aug-01	Cash	30,000
	Loan - Liability		31,000
Aug-04	Equipments Kayaks	28,000
	Cash		12,000
Aug-10	Cash	3,000
	Deferred Revenue	40,000
	Service Revenue (Clinic)		43,000
Aug-17	Cash	10,500
	Service Revenue (Clinic)		10,500
Aug-24	Accounts Payable	1,800
	Cash		1,600
Sep-01	Prepaid Rent	2,400
	Cash		2,400
21-Sep	Cash	13,200
	Service Revenue - Clinic		13,200
Oct-17	Cash                                                 Dr.	17,900
	To service Revenue - Clinic		17,900
Dec-01	No Entry
Dec-05	No Entry
Dec-08	Misc Exp.	1,200
	Cash		1,200
Dec-12	Supplies (Racing)	2,800
	Accounts Payable		2,800
Dec-15	Cash	20,000
	Service Revenue (Racing)		20,000
Dec-16	Salary	2,000
	Cash		2,000
Dec-31	Dividend	4,000
	Cash		4,000
Dec-31	No Entry - Personal Expenditure
	Not related to Buisness
Answer 2.
Journal Entry
Adjusting Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a	Dep. Exp.	8,000
	Accumulated Dep - Equip.		8,000
b	Insurance Exp.	2,400
	Prepaid Insurance		2,400
c	Rent Exp.	800
	Prepaid Rent		800
d	Supplies Exp.	1,500
	Supplies (Office)		1,500
e	Interest Exp.	750
	Interest Payable		750
f	Supplies Exp.                              Dr.	2,600
	To Supplies (Racing)		2,600
g	Income Tax Expense                Dr.	14,000
	To Income Tax Payable		14,000

Answer 3.
Cash					Prepaid Insurance
Beg. Bal	9,000.00	28,000.00	Aug-04		Beg. Bal	4,800.00	2,400.00	b
Aug-01	30,000.00	1,800.00	Aug-24
Aug-10	3,000.00	2,400.00	Sep-01
Aug-17	10,500.00	1,200.00	Dec-08
21-Sep	13,200	2,000.00	Dec-16
Oct-17	17,900.00	4,000.00	Dec-31
Dec-15	20,000.00
End. Bal	64,200.00				End. Bal	2,400.00
Supplies (office)					Equipment (Bikes)
Beg. Bal	1,800.00	1,500.00	d		Beg. Bal	12,000.00
End. Bal	300.00				End. Bal	12,000.00
Accounts Payable					Deferred revenue
Beg. Bal		1,800.00			Beg. Bal		4,000.00
Aug-24	1,800.00	2,800.00	Dec-12		Aug-10	4,000.00
End. Bal		2,800.00			End. Bal		-
Common Stock					Service Revenue (Clinic)
Beg. Bal		20,000.00			Beg. Bal		4,300.00
							3,000.00	Aug-10
							4,000.00	Aug-10
							10,500.00	Aug-17
							13,200	Sep-18
							17,900.00	Oct-17
End. Bal		20,000.00			End. Bal		52,900.00
Advertising Exp.					Legal fees Exp.
Beg. Bal	1,000.00				Beg. Bal	1,500.00
End. Bal	1,000.00				End. Bal	1,500.00
Loan Liability					Equipment - Kayaks
Beg. Bal		-			Beg. Bal	-
		30,000.00	Aug-01		Aug-04	28,000.00
End. Bal		30,000.00			End. Bal	28,000.00
Prepaid rent					Misc Exp.
Beg. Bal	-	800.00	c		Beg. Bal	-
Sep-01	2,400.00				Dec-08	1,200.00
End. Bal.	1,600.00				End. Bal.	1,200.00
Supplies (Racing)					Service Revenue (Racing)
Beg. Bal	-	2,600.00	f		Beg. Bal		-
Dec-12	2,800.00						20,000.00	Dec-15
End. Bal.	200.00				End. Bal.		20,000.00
Salaries Exp.					Dividends
Beg. Bal	-				Beg. Bal		-
Dec-16	2,000.00				Dec-31	4,000.00
End. Bal.	2,000.00				End. Bal.	4,000.00
Dep. Exp.					Accumulated Dep. - Equipments
Beg. Bal	-				Beg. Bal		-
a	8,000.00						8,000.00	a
End. Bal.	8,000.00				End. Bal.		8,000.00
Insurance Exp.					Rent Exp.
Beg. Bal	-				Beg. Bal	-
b	2,400.00				c	800.00
End. Bal.	2,400.00				End. Bal.	800.00
Supplies Exp.					Interest Exp.
Beg. Bal	-				Beg. Bal	-
d	1,500.00				e	750.00
f	2,600.00
End. Bal.	4,100.00				End. Bal.	750.00
Interest Payable					Income Tax Exp.
Beg. Bal		-			Beg. Bal	-
		750.00	e		g	14,000.00
End. Bal.		750.00			End. Bal.	14,000.00
Income Tax Payable
Beg. Bal		-
		14,000.00	g
End. Bal.		14,000.00

Answer 4.
Trial Balance
As of Dec 31
Assets
Cash	64,200.00
Prepaid Insurance	2,400.00
Supplies (office)	300.00
Equipment (Bikes)	12,000.00
Equipment - Kayaks	28,000.00
Prepaid rent	1,600.00
Supplies (Racing)	200.00
Accumulated Dep. - Equipments		8,000.00
Liabilities
Accounts Payable		2,800.00
Loan Liability		30,000.00
Interest Payable		750.00
Income Tax Payable		14,000.00
Equity
Common Stock		20,000.00
Dividends
Dividends	4,000.00
Revenues
Service Revenue (Clinic)		52,900.00
Service Revenue (Racing)		20,000.00
Expenses
Advertising Exp.	1,000.00
Legal fees Exp.	1,500.00
Misc Exp.	1,200.00
Salaries Exp.	2,000.00
Dep. Exp.	8,000.00
Insurance Exp.	2,400.00
Rent Exp.	800.00
Supplies Exp.	4,100.00
Interest Exp.	750.00
Income Tax Exp.	14,000.00
Total	148,450.00	148,450.00