
1.
Prepare journal entries to record adventure T transactions occurring during the first six months of 2022.
1.

Explanation of Solution
Prepare journal entries to record adventure T transactions occurring during the first six months of 2022 as follows:
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
January 24,2022 | Equipment | 5,000 | ||
Cash | 5,000 | |||
(To record the equipment purchased for cash) | ||||
February 25, 2022 | 3,000 | |||
Service Revenue | 3,000 | |||
(To record providing services on account) | ||||
February 28, 2022 | Cash | 2,850 | ||
Sales discounts | 150 | |||
Accounts Receivable | 3,000 | |||
(To record receipt of cash with discount ) | ||||
March 19, 2022 | Accounts receivable | 4,000 | ||
Service Revenue | 4,000 | |||
(To record providing services on account) | ||||
March 27, 2022 | Cash | 3,800 | ||
Sales discounts | 200 | |||
Accounts Receivable | 4,000 | |||
(To record receipt of cash with discount ) | ||||
April 7, 2022 | Cash | 7,500 | ||
Deferred revenue | 7,500 | |||
(To record cash received in advance) | ||||
April 14, 2022 | Deferred revenue | 7,500 | ||
Service Revenue | 7,500 | |||
(To record providing services on account) | ||||
May 9, 2022 | Accounts Receivable | 6,000 | ||
Service Revenue | 6,000 | |||
(To record providing services on account) | ||||
May 31, 2022 | Notes receivable | 6,000 | ||
Accounts receivable | 6,000 | |||
(To record acceptance of notes receivable) | ||||
June 15, 2022 | Accounts Receivable | 24,000 | ||
Service Revenue | $24,000 | |||
(To record providing services on account) |
Table (1)
2.
Prepare adjusting
2.

Explanation of Solution
a.
Prepare adjusting journal entry to record uncollectible accounts.
Journal entry for uncollectible accounts:
Date | Account Title and Explanation | Debit($) | Credit($) | |
June 30, 2022 | Bad debts expenses (1) | 2,400 | ||
Allowance for uncollectible accounts | 2,400 | |||
(To record the estimation of future bad debts) |
Table (2)
Working note:
(1)
Bad debt expense:
Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. Estimated future uncollectible accounts receivable are known as bad debt expense.
- Bad debt expense is a component of
stockholders’ equity and decreased it. So, debit bad debt expense for $2,400, - Allowance for uncollectible accounts is a contra asset account and decreased it. So, credit allowance for uncollectible accounts for $2,400.
b.
Prepare
Date | Account Title and Explanation | Debit($) | Credit($) | |
June 30, 2022 | Interest receivable | 40 | ||
Interest revenue (2) | 40 | |||
(To record accrued interest revenue) |
Table (3)
Working note:
Calculate interest revenue.
(2)
- Interest receivable is a current asset, and it is increased. Therefore, debit interest receivable account for $40.
- Interest revenue is a component of stockholders’ equity, and it is increased. Therefore, credit interest revenue account for $40.
C.
Prepare a partial
Incorporation GA | ||
Partial Balance Sheet | ||
As at June 30, 2022 | ||
Assets | Amount ($) | Amount ($) |
Current assets: | ||
Accounts receivable | 24,000 | |
Less: Allowance for uncollectible accounts | (2,400) | |
Net accounts receivable | 21,600 |
Table (4)
Prepare existing trail balance of Incorporation GA.
Great Adventures, Inc. | ||
30th June 2022 | ||
Accounts | Debit ($) | Credit ($) |
Cash | 38,500 | |
Accounts Receivable | -0- | |
Allowance for Uncollectible Accounts | -0- | |
Interest Receivable | -0- | |
Notes Receivable | -0- | |
Prepaid Rent | 400 | |
Equipment | 40,000 | |
16,000 | ||
Accounts Payable | 2,800 | |
Deferred Revenue | -0- | |
Interest Payable | 1,650 | |
Notes Payable | 30,000 | |
Common Stock | 20,000 | |
33,450 | ||
Service Revenue | -0- | |
Interest Revenue | -0- | |
Sales Discounts | -0- | |
Depreciation Expense | 8,000 | |
Insurance Expense | 2,400 | |
Rent Expense | 1,200 | |
Salaries Expense | 12,000 | |
Supplies Expense | 500 | |
Bad Debt Expense | -0- | |
Interest Expense | 900 | |
Totals | 103,900 | 103,900 |
Table (5)
(2)
Prepare financial statement of Incorporation GA.
Great Adventures, Inc. | ||
Income Statement | ||
For the period ended June 30, 2022 | ||
Amount ($) | Amount ($) | |
Revenues: | ||
Service revenue | 44,500 | |
Sales discounts | (350) | |
Interest revenue | 40 | |
Net revenues | 44,190 | |
Expenses: | ||
Depreciation Expense | 8,000 | |
Insurance Expense | 2,400 | |
Rent Expense | 1,200 | |
Salaries Expense | 12,000 | |
Supplies Expense | 500 | |
Bad Debt Expense | 2,400 | |
Interest Expense | 900 | |
Total expenses | 27,400 | |
Net income | 16,790 |
Table (6)
Great Adventures, Inc. | |||
Balance Sheet | |||
30th June 2022 | |||
Amount ($) | Amount ($) | ||
Assets | Liabilities | ||
Current assets: | Current liabilities: | ||
Cash | 47,650 | Accounts payable | 2,800 |
Accounts receivable | 24,000 | Interest payable | 1,650 |
Allowance for uncollectible accounts | -2,400 | Total current liabilities | 4,450 |
Interest receivable | 40 | Notes payable | 30,000 |
Notes receivable | 6,000 | Total liabilities | 34,450 |
Prepaid Rent | 400 | ||
Total current assets | 75,690 | Stockholders’ Equity | |
Long-term assets: | Common stock | 20,000 | |
Equipment | 29,000 | Retained earnings | 50,240 |
Total stockholders’ equity | 70,240 | ||
Total assets | 104,690 | Total liabilities and stockholders’ equity | 104,690 |
Table (7)
(3)
Prepare closing entries of Incorporation GA.
Date | Account titles and Explanation | Debit | Credit |
30 June 2021 | Service revenue | $44,500 | |
Interest revenue | $40 | ||
Sales discount | $350 | ||
Retained earnings | $44,190 | ||
(To record close revenue accounts) |
Table (8)
- Service revenue is a component of stockholders’ equity, and it is decreased. Therefore, debit service revenue account for $44,500.
- Interest revenue is a component of stockholders’ equity, and it is decreased. Therefore, debit interest revenue account for $40.
- Sales discount is a contra revenue account, and it is decreased. Therefore, credit sales discount account for $350.
- Retained earnings are a component of stockholders’ equity, and it is increased. Therefore, credit retained earnings account for $44,190.
Date | Account titles and Explanation | Debit | Credit |
30 June 2021 | Retained earnings | $27,400 | |
Depreciation expense | $8,000 | ||
Insurance expense | $2,400 | ||
Rent expense | $1,200 | ||
Salaries expense | $12,000 | ||
Supplies expense | $500 | ||
Bad debt expense | $2,400 | ||
Interest expense | $900 | ||
(To record close expense accounts) |
Table (9)
- Retained earnings are a component of stockholders’ equity, and it is decreased. Therefore, debit retained earnings account for $27,400.
- Depreciation expense is a component of stockholders’ equity, and it is increased. Therefore, credit depreciation expense account for $8,000.
- Insurance expense is a component of stockholders’ equity, and it is increased. Therefore, credit insurance expense account for $2,400.
- Rent expense is a component of stockholders’ equity, and it is increased. Therefore, credit rent expense account for $1,200.
- Salaries expense is a component of stockholders’ equity, and it is increased. Therefore, credit salaries expense account for $12,000.
- Supplies expense is a component of stockholders’ equity, and it is increased. Therefore, credit supplies expense account for $500.
- Bad debt expense is a component of stockholders’ equity, and it is increased. Therefore, credit bad debt expense account for $2,400.
- Interest expense is a component of stockholders’ equity, and it is increased. Therefore, credit interest expense account for $900.
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