Accounting
Accounting
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ACC120 Homework 6
| Tony and Suzie graduate from college in May 2012 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, 2012, 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. |
| Jul. 1 | Suzie purchases $10,000 of Great Adventures’ common stock using cash she saved during college. |
| 1 | Tony purchases $10,000 of Great Adventures’ common stock by borrowing from a local bank using his personal vehicle as collateral. |
| 1 | Suzie purchases a one-year insurance policy for $4,800 ($400 per month) to cover injuries to participants during outdoor clinics. |
| 2 | The company pays legal fees of $1,500 associated with incorporation. |
| 4 | Suzie purchases office supplies of $1,800 on account. |
| 7 | Suzie pays advertising of $300 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $50 the day of the clinic. |
| 8 | Tony purchases 10 mountain bikes, paying $12,000 cash. |
| 15 | On the day of the clinic, Great Adventures receives cash of $2,000 from 40 bikers. Tony conducts the mountain biking clinic. |
| 22 | Because of the success of the first mountain biking clinic, Tony holds another mountain biking clinic and the company receives $2,300. |
| 24 | Suzie pays advertising of $700 to a local radio station for a kayaking clinic to be held on August 10. Attendees can pay $100 in advance or $150 on the day of the clinic. |
| 30 | Great Adventures receives cash of $4,000 in advance from 40 kayakers for the upcoming kayak clinic. |
| Record each transaction in July. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| July 1 | Cash | 10,000 | |
| Common stock | 10,000 | ||
| July 1 | Cash | 10,000 | |
| Common stock | 10,000 | ||
| July 1 | Prepaid insurance | 4,800 | |
| Cash | 4,800 | ||
| July 2 | Legal fees expense | 1,500 | |
| Cash | 1,500 | ||
| July 4 | Supplies | 1,800 | |
| Accounts payable | 1,800 | ||
| July 7 | Advertising expense | 300 | |
| Cash | 300 | ||
| July 8 | Equipment | 12,000 | |
| Cash | 12,000 | ||
| July 15 | Cash | 2,000 | |
| Service revenue | 2,000 | ||
| July 22 | Cash | 2,300 | |
| Service revenue | 2,300 | ||
| July 24 | Advertising expense | 700 | |
| Cash | 700 | ||
| July 30 | Cash | 4,000 | |
| Unearned revenue | 4,000 |
| Post each transaction to T-accounts. (Record the transactions in the given order. Omit the “$” sign in your response.) |
| Cash |
| July 1 | 10,000 | July 1 | 4,800 | |
| July 1 | 10,000 | July 2 | 1,500 | |
| July 15 | 2,000 | July 7 | 300 | |
| July 22 | 2,300 | July 8 | 12,000 | |
| July 30 | 4,000 | July 24 | 700 | |
| End. bal. | 9,000 | |||
| Prepaid Insurance |
| July 1 | 4,800 | |||
| End. bal. | 4,800 | |||
| Supplies |
| July 4 | 1,800 | |||
| End. bal. | 1,800 | |||
| Equipment |
| July 8 | 12,000 | |||
| End. bal. | 12,000 | |||
| Accounts Payable |
| July 4 | 1,800 | |||
| End. bal. | 1,800 | |||
| Unearned Revenue |
| July 30 | 4,000 | |||
| End. bal. | 4,000 | |||
| Common Stock |
| July 1 | 10,000 | |||
| July 1 | 10,000 | |||
| End. bal. | 20,000 | |||
| Service Revenue |
| July 15 | 2,000 | |||
| July 22 | 2,300 | |||
| End. bal. | 4,300 | |||
| Advertising Expense |
| July 7 | 300 | |||
| July 24 | 700 | |||
| End. bal. | 1,000 | |||
| Legal Fees Expense |
| July 2 | 1,500 | |||
| End. bal. | 1,500 | |||
| Prepare a trial balance. (Omit the “$” sign in your response.) |
| GREAT ADVENTURES, INC. Trial Balance July 31, 2012 |
||
| Accounts | Debit | Credit |
| Cash | $ 9,000 | |
| Prepaid Insurance | 4,800 | |
| Supplies | 1,800 | |
| Equipment | 12,000 | |
| Accounts Payable | $ 1,800 | |
| Unearned Revenue | 4,000 | |
| Common Stock | 20,000 | |
| Service Revenue | 4,300 | |
| Advertising Expense | 1,000 | |
| Legal Fees expense | 1,500 | |
| Totals | $ 30,100 | $ 30,100 |
