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 correct 10,000 correct  
         Common stock correct   10,000 correct
  July 1   Cash correct 10,000 correct  
         Common stock correct   10,000 correct
  July 1   Prepaid insurance correct 4,800 correct  
         Cash correct   4,800 correct
  July 2   Legal fees expense correct 1,500 correct  
         Cash correct   1,500 correct
  July 4   Supplies correct 1,800 correct  
         Accounts payable correct   1,800 correct
  July 7   Advertising expense correct 300 correct  
         Cash correct   300 correct
  July 8   Equipment correct 12,000 correct  
         Cash correct   12,000 correct
  July 15   Cash correct 2,000 correct  
         Service revenue correct   2,000 correct
  July 22   Cash correct 2,300 correct  
         Service revenue correct   2,300 correct
  July 24   Advertising expense correct 700 correct  
         Cash correct   700 correct
  July 30   Cash correct 4,000 correct  
         Unearned revenue correct   4,000 correct


Post each transaction to T-accounts. (Record the transactions in the given order. Omit the “$” sign in your response.)





  July 1 10,000 correct     July 1 4,800 correct
  July 1 10,000 correct     July 2 1,500 correct
  July 15 2,000 correct     July 7 300 correct
  July 22 2,300 correct     July 8 12,000 correct
  July 30 4,000 correct     July 24 700 correct
  End. bal. 9,000 correct      





Prepaid Insurance



  July 1 4,800 correct      
  End. bal. 4,800 correct      








  July 4 1,800 correct      
  End. bal. 1,800 correct      








  July 8 12,000 correct      
  End. bal. 12,000 correct      





Accounts Payable



        July 4 1,800 correct
        End. bal. 1,800 correct





Unearned Revenue



        July 30 4,000 correct
        End. bal. 4,000 correct





Common Stock



        July 1 10,000 correct
        July 1 10,000 correct
        End. bal. 20,000 correct





Service Revenue



        July 15 2,000 correct
        July 22 2,300 correct
        End. bal. 4,300 correct





Advertising Expense



  July 7 300 correct      
  July 24 700 correct      
  End. bal. 1,000 correct      





Legal Fees Expense



  July 2 1,500 correct      
  End. bal. 1,500 correct      






Prepare a trial balance. (Omit the “$” sign in your response.)



GREAT ADVENTURES, INC. Trial Balance July 31, 2012

Accounts Debit Credit
  Cash $ 9,000 correct  
  Prepaid Insurance 4,800 correct  
  Supplies 1,800 correct  
  Equipment 12,000 correct  
  Accounts Payable   $ 1,800 correct
  Unearned Revenue   4,000 correct
  Common Stock   20,000 correct
  Service Revenue   4,300 correct
  Advertising Expense 1,000 correct  
  Legal Fees expense 1,500 correct  
        Totals $ 30,100 correct $ 30,100 correct
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