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
Great Adventures Problem 3-1 Part 3 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.)
  

Also Prepare a classified balance sheet as of December 31, 2018​

Answer 1

Journal

Date	Particulars	Debit	Credit
01-08-2018	Cash     To Loan from City Council (Being loan taken for 6% Interest)	30000	30000
04-08-2018	Equipment (Bikes)      To Cash	28000	28000
10-08-2018	Cash       To Service revenue	3000	3000
10-08-2018	Deferred Revenue       To Service revenue	4000	4000
17-08-2018	Cash       To Service revenue	10500	10500
24-08-2018	Accounts payable      To Cash	1800	1800
01-09-2018	Rent      To Cash	2400	2400
21-09-2018	Cash       To Service Revenue	13200	13200
17-10-2018	Cash        To Service revenue	17900	17900
08-12-2018	Miscellaneous Expense         To cash	1200	1200
12-12-2018	Suppliers         To Accounts payable	2800	2800
15-12-2018	Cash        To Service revenue	20000	20000
16-12-2018	Salary         To cash	2000	2000
31-12-2018	Dividend paid          To Cash	4000	4000
31-12-2018	Depreciation P/L         To Bikes	8000	8000
31-12-2018	Insurance       To Prepaid insurance	4800	4800
31-12-2018	Prepaid rent      To Rent	1600	1600
31-12-2018	Supplies consumed     To supplies office	4100	4100
31-12-2018	Interest expense     To interest payable	750	750
31-12-2018	Income tax      To Income tax payable	14000	14000

Adjusted trial balance
	Balance as on end of July		Adjustment Entries		Final Balance as on 31-12-2018
Particulals	Debit	Credit	Debit	Credit	Debit	Credit
Assets
Cash	9000		94600	39400	64200
Pre paid insurance	4800			4800	0
Supplies	1800		2800	4100	500
Equipment (bikes)	12000		28000		40000
Pre paid rent			1600		1600
Contra Asset
Depreciation (B/S)				8000
Liabilities
Accounts payables		1800	1800	2800		2800
Deferred revenue		4000	4000			0
Loan from City Council				30000		30000
Interest payable				750		750
Income tax payable				14000		14000
Equity
Common Stock		20000				20000
Revenue
Service revenue		4300		68600		72900
Expenses
Advertising expense	1000				1000
Legal fees	1500				1500
Rent			2400	1600	800
Miscellaneous Expense			1200		1200
Salary			2000		2000
Depreciation			8000		8000
Insurance			4800		4800
Supplies consumed			4100		4100
Interest expense			750		750
Income tax			14000		14000
Dividend
Dividend			4000		4000
	30100	30100	174050	174050	148450	140450

Balance Sheet as on 31-12-2018
Liability	Amount	Amount	Asset	Amount	Amount
Capital			Fixed Asset
Common Stock	20000		Equipment (bikes)	40000
Add Profit	30750		Less : Depre	-8000
		50750			32000
Loans
Loan from City Council	30000		Current Assets
		30000	Cash	64200
Current Liability			Supplies	500
Accounts payables	2800		Pre paid rent	1600	66300
Interest payable	750
Income tax payable	14000	17550
Total		98300	Total		98300Working

Workings - P/L account

Profit and loss account
Expenses	Amount	Revenue	Amount
Advertising expense	1000	Service revenue	72900
Legal fees	1500
Rent	800
Miscellaneous Expense	1200
Salary	2000
Insurance	4800
Supplies consumed	4100
Interest expense	750
Dividend	4000
Depreciation	8000
Income tax	14000
Profit	30750
	72900		72900