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GREAT ADVENTURES PROJECT INSTRUCTIONS

PART 1

1. Read Great Adventures Case in ADDITIONAL PERSCPECTIVES Continuing problem

(i) Page 49

(ii) Page 102

(iii) Page 161

2. Complete the requirements 1 through 8 for Great Adventure case (AP3-1) on pages 161-162 using Excel Spreadsheets.

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go book contents S80 search AP1-1 Tony Matheson plans to graduate from college in May 2018 after spending four years earning a degree in sports and recreation management. Since beginning T-ball at age five, he's been actively involved in sports and enjoys the outdoors. Each summer growing up, he and his father would spend two weeks at a father/son outdoor camp. These fond memories are part of the reason he chose his major. He wants to remain involved in these outdoor activities and provide others with the same adventures he was able to share with his dad. He decides to start an outdoor adventure company. However, he's not sure he has the business background necessary to do this. This is where Suzie Ramos can help. Suzie also plans to graduate in May 2018 with a major in business. Suzie and Tony first met their sophomore year and have been friends ever since as they share a strong interest in sports and outdoor activities. They decide to name their company Great Adventures. They will provide clinics for a variety of outdoor activities such as kayaking, mountain biking, rock climbing, wilderness survival techniques, orienteering, backpacking, and other adventure sports Required: 1. What are the three primary forms of business organizations Tony and Suzie might choose for Great Adventures? Explain the advantages and disadvantages of each. Which form do you recommend for Great Adventures? 2. Discuss some of the typical financing, investing, and operating activities that a company like Great Adventures is likely to have. 3. What specific account names for assets. liabilities, stockholders' equity. revenues, and expenses would the company likely use to record its business transactions? To report company performance. Suzie plans to prepare the four primary financial statements. Explain the type of information provided by each statement. book contents 1021 search eboo 50 AP2-1 Tony and Suzie graduate from college in May 2018 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, 2018, 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. 1 Sell $10,000 of common stock to Tony. 1 Purchase a one-year insurance policy for $4,800 (S400 per month) to cover injuries to participants during outdoor clinics. 2 Pay legal fees of $1,500 associated with incorporation. 4 Purchase office supplies of $1,800 on account. 7 Pay for 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 Purchase 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 Pay for 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. search 102 go book contents July 1 Sell $10,000 of common stock to Suzie. 1 Sell $10,000 of common stock to Tony. 1 Purchase a one-year insurance policy for $4,800 ($400 per month) to cover injuries to participants during outdoor clinics. 2 Pay legal fees of $1,500 associated with incorporation. 4 Purchase office supplies of $1,800 on account. 7 Pay for 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 Purchase 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 Pay for 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. Required: 1. Record each transaction in July for Great Adventures. (Note: 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. 1611190 book contents 2 8 0 search ebook Great Adventures (This is a continuation of the Great Adventures problem from earlier chapters.) Continuing Proble AP3-1 You may refer to the opening story of Tony and Suzie and their decision to start Great Adventures in AP 1-1. More of their story and the first set of transactions for the company in July are presented in AP 2-1 and repeated here. July 1 Sell $10,000 of common stock to Suzie. 1 Sell $10,000 of common stock to Tony. 1 Purchase a one-year insurance policy for $4,800 ($400 per month) to cover injuries to participants during outdoor clinics. 2 Pay legal fees of $1,500 associated with incorporation 4 Purchase office supplies of $1,800 on account 7 Pay for 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 Purchase 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 Pay for 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. The following transactions occur over the remainder of the year. Aug. 1 Great Adventures obtains a $30,000 low-interest loan for the company search ebook go 161 go book contents o The following transactions occur over the remainder of the year. 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. company receives 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. 161 go book contents L os search ebook go 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 Page 162 a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,000 b. Six months of the one-year insurance policy purchased on July 1 has expired. c. Four months of the one-year rental policy purchased on September 1 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. 1. 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. Ramli gob ook contents search ebook a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,000. b. Six months of the one-year insurance policy purchased on July 1 has expired. c. Four months of the one-year rental policy purchased on September 1 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. Required: 1. Record transactions from July 1 through December 31 2. Record adjusting entries as of December 31, 2018 3. Post transactions from July 1 through December 31 and adjusting entries on December 31 to T-accounts. 4. Prepare an adjusted trial balance as of December 31, 2018. For the period July 1 to December 31, 2018, prepare an income statement and statement of stockholders' equity. Prepare a classified balance sheet as of December 31, 2018 6. Record closing entries as of December 31, 2018 7. Post closing entries to T-accounts. 8. Prepare a post-closing trial balance as of December 31, 2018

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