Tony and Suzie graduate from college in May 2024 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, 2024, Tony and Suzie organize their new company as a corporation, Great Adventures Incorporated The articles of incorporation state that the corporation will sell 24,000 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 $12,000 of common stock to Suzie.
July 1	Sell $12,000 of common stock to Tony.
July 1	Purchase a one-year insurance policy for $3,960 ($330 per month) to cover injuries to participants during outdoor clinics.
July 2	Pay legal fees of $1,200 associated with incorporation.
July 4	Purchase office supplies of $1,100 on account.
July 7	Pay $270 to a local newspaper for advertising to appear immediately for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $40 the day of the clinic.
July 8	Purchase 10 mountain bikes, paying $15,100 cash.
July 15	On the day of the clinic, Great Adventures receives cash of $1,600 in total from 40 bikers. Tony and Suzie conducts the mountain biking clinic.
July 22	Because of the success of the first mountain biking clinic, Tony and Suzie holds another mountain biking clinic and the company receives $2,200.
July 24	Pay $720 to a local radio station for advertising to appear immediately. A kayaking clinic will be held on August 10, and attendees can pay $140 in advance or $190 on the day of the clinic.
July 30	Great Adventures receives total cash of $9,800 in advance from 70 kayakers for the upcoming kayak clinic.
The following transactions occur over the remainder of 2024.
August 1	Great Adventures obtains a $38,000 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.
August 4	The company purchases 14 kayaks, paying $16,500 cash.
August 10	Tony and Suzie conduct the first kayak clinic. In addition to the $9,800 that was received in advance from kayakers on July 30, the company receives additional cash of $3,800 from twenty new kayakers on the day of the clinic.
August 17	Tony and Suzie conducts a second kayak clinic, and the company receives $10,700 cash.
August 24	Office supplies of $1,100 purchased on July 4 are paid in full.
September 1	To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed for one year, paying $3,360 ($280 per month) in advance.
September 21	Tony and Suzie conduct a rock-climbing clinic. The company receives $13,500 cash.
October 17	Tony and Suzie conduct 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 $19,100 cash.
December 1	Tony and Suzie decide 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 $620.
December 5	To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $30 in salary for each team that competes in the race. His salary will be paid after the race.
December 8	The company pays $1,900 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense.
December 12	The company purchases racing supplies for $2,300 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.
December 15	The company receives $24,800 cash from a total of forty teams, and the race is held.
December 16	The company pays Victor’s salary of $1,200.
December 31	The company pays a dividend of $5,000 ($2,500 to Tony and $2,500 to Suzie).
December 31	Using his personal money, Tony purchases a diamond ring for $5,300. 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, 2024.

Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,600.

Six months’ of the one-year insurance policy purchased on July 1 has expired.

Four months of the one-year rental agreement purchased on September 1 has expired.

Of the $1,100 of office supplies purchased on July 4, $270 remains.

Interest expense on the $38,000 loan obtained from the city council on August 1 should be recorded.

Of the $2,300 of racing supplies purchased on December 12, $160 remains.

Suzie calculates that the company owes $14,700 in income taxes.

4. Prepare an adjusted trial balance as of December 31, 2024.

Transcribed Image Text:

GREAT ADVENTURES, INCORPORATED Adjusted Trial Balance December 31, 2024 Accounts Cash Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Accounts Payable Income Tax Payable Interest Payable Notes Payable Common Stock Dividends Service Revenue (Clinic) Service Revenue (Racing) Advertising Expense Depreciation Expense Income Tax Expense Insurance Expense Interest Expense Debit Credit GREAT ADVENTURES, INCORPORATED Adjusted Trial Balance December 31, 2024 Accounts Cash Prepaid Insurance Prepaid Rent Supplies (Office) Supplies (Racing) Equipment (Bikes) Equipment (Kayaks) Accumulated Depreciation Accounts Payable Income Tax Payable Interest Payable Notes Payable Common Stock Dividends Service Revenue (Clinic) Service Revenue (Racing) Advertising Expense Depreciation Expense Income Tax Expense Insurance Expense Interest Expense Debit Credit

Answer rating: 100% (QA)

The journal entries for the given transactions 1 July 1 Debit Cash 12000 Credit Common Stock ... View the full answer