Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, theyll hold their first adventure
Tony and Suzie graduate from college in May 2021 and begin developing their new business. They begin by offering clinics for basic outdoor activities such as mountain biking or kayaking. Upon developing a customer base, they’ll hold their first adventure races. These races will involve four-person teams that race from one checkpoint to the next using a combination of kayaking, mountain biking, orienteering, and trail running. In the long run, they plan to sell outdoor gear and develop a ropes course for outdoor enthusiasts.
On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 20,000 shares of common stock for $1 each. Each share of stock represents a unit of ownership. Tony and Suzie will act as co-presidents of the company. The following business activities occur during July for Great Adventures.
July 1 Sell $10,000 of common stock to Suzie.
July 1 Sell $10,000 of common stock to Tony.
July 1 Purchase a one-year insurance policy for $4,800 ($400 per month) to cover injuries to participants during outdoor clinics.
July 2 Pay legal fees of $1,500 associated with incorporation.
July 4 Purchase office supplies of $1,800 on account.
July 7 Pay $300 to a local newspaper for advertising of $300 to appear immediately for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $50 the day of the clinic.
July 8 Purchase 10 mountain bikes, paying $12,000 cash.
July 15 On the day of the clinic, Great Adventures receives cash of $2,000 from 40 bikers.
Tony conducts the mountain biking clinic.
July 22 Because of the success of the first mountain biking clinic, Tony holds another mountain biking clinic and the company receives $2,300.
July 24 Pay $700 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $100 in advance or $150 on the day of the clinic.
July 30 Great Adventures receives cash of $4,000 in advance from 40 kayakers for the upcoming kayak clinic.
1. Record each transaction in July for Great Adventures. These same transactions can be assigned as part of a more complete accounting cycle in Chapter 3’s AP3–1.
2. Post each transaction to T-accounts.
3. Prepare a trial balance.Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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