Dec 1
|[The following information applies to the questions displayed below.] |
|On December 1, 2015, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to |
|begin operations immediately by purchasing the assets and taking over the location of Rent-It, an equipment rental company that was going |
|out of business. The newly formed company uses the following accounts: |
|Cash |Capital stock |
|Accounts receivable |Retained earnings |
|Prepaid rent |Dividends |
|Unexpired insurance |Income summary |
|Office supplies |Rental fees earned |
|Rental equipment |Salaries expense |
|Accumulated depreciation: Rental equipment |Maintenance expense |
|Notes payable |Utilities expense |
|Accounts payable |Rent expense |
|Interest payable |Office supplies expense |
|Salaries payable |Depreciation expense |
|Dividends payable |Interest expense |
|Unearned rental fees |Income taxes expense |
|Income taxes payable | |
| The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the |
|corporation entered into the following transactions: |
|Dec. 1 |Issued to John and Patty Driver 23,000 shares of capital stock in exchange for a total of $230,000 cash. |
|Dec. 1 |Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $136,000 cash and issued a one-year note payable |
| |for $65,600. The note, plus all 12-months of accrued interest, are due November 30, 2016. |
|Dec. 1 |Paid $9,900 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It. |
|Dec. 4 |Purchased office supplies on account from Modern Office Co., $1,700. Payment due in 30 days. (These supplies are expected to |
| |last for several months; debit the Office Supplies asset account.) |
|Dec. 8 |Received $8,600 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.) |
|Dec. 12 |Paid salaries for the first two weeks in December, $4,500. |
|Dec. 15 |Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,500, of which |
| |$12,400 was received in cash. |
|Dec. 17 |Purchased on account from Earth Movers, Inc., $800 in parts needed to repair a rental tractor. (Debit an expense account.) |
| |Payment is due in 10 days. |
|Dec. 23 |Collected $2,400 of the accounts receivable recorded on December 15. |
|Dec. 26 |Rented a backhoe to Mission Landscaping at a price of $280 per day, to be paid when the backhoe is returned. Mission |
| |Landscaping expects to keep the backhoe for about two or three weeks. |
|Dec. 26 |Paid biweekly salaries, $4,500. |
|Dec. 27 |Paid the account payable to Earth Movers, Inc., $800. |
|Dec. 28 |Declared a dividend of 10 cents per share, payable on January 15, 2016. |
|Dec. 29 |Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co-defendant in a |
| |$27,000 lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had left the rented backhoe in a fenced construction |
| |site owned by Collier Construction. After working hours on December 26, Davenport had climbed the fence to play on parked |
| |construction equipment. While playing on the backhoe, he fell and broke his arm. The extent of the company’s legal and |
| |financial responsibility for this accident, if any, cannot be determined at this time. ( Note: This event does not require a |
| |journal entry at this time, but may require disclosure in notes accompanying the statements.) |
|Dec. 29 |Purchased a 12-month public-liability insurance policy for $9,120. This policy protects the company against liability for |
| |injuries and property damage caused by its equipment. However, the policy goes into effect on January 1, 2016, and affords no |
| |coverage for the injuries sustained by Kevin Davenport on December 26. |
|Dec. 31 |Received a bill from Universal Utilities for the month of December, $690. Payment is due in 30 days. |
|Dec. 31 |Equipment rental fees earned during the second half of December amounted to $20,900, of which $15,600 was received in cash. |
|Data for Adjusting Entries |
|a. |The advance payment of rent on December 1 covered a period of three months. |
|b. |The annual interest rate on the note payable to Rent-It is 6 percent. |
|c. |The rental equipment is being depreciated by the straight-line method over a period of eight years. |
|d. |Office supplies on hand at December 31 are estimated at $660. |
|e. |During December, the company earned $4,200 of the rental fees paid in advance by McNamer Construction Company on December 8. |
|f. |As of December 31, six days’ rent on the backhoe rented to Mission Landscaping on December 26 has been earned. |
|g. |Salaries earned by employees since the last payroll date (December 26) amounted to $1,900 at month-end. |
|h. |It is estimated that the company is subject to a combined federal and state income tax rate of 30 percent of income before income |
| |taxes (total revenue minus all expenses other than income taxes). These taxes will be payable in 2016. |
rev: 10_15_2014_QC_56676, 11_10_2014_QC_58769
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1.
value:
10.00 points
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|Journalize the December transactions. Do not record adjusting entries at this point. (If no entry is required for a transaction/event, |
|select "No journal entry required" in the first account field.) |
|Prepare the necessary adjusting entries for December. (If no entry is required for a transaction/event, select "No journal entry required"|
|in the first account field. Do not round intermediate calculations.) |
|Prepare closing entries and post to ledger accounts. (If no entry is required for a transaction/event, select "No journal entry required" |
|in the first account field. Do not round intermediate calculations.) |
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|Post the entries into the ledger accounts. |
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3.
value:
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|Complete the 10-column worksheet for the year ended December 31. (For accounts where multiple Adjustments are required, combine all debit |
|entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount |
|and enter this amount in the credit column of the worksheet.) |
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4.
value:
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|Prepare an income statement for the year ended December 31. |
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5.
value:
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|Prepare a statement of retained earnings for the year ended December 31. |
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6.
value:
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|Prepare a balance sheet (in report form) as of December 31. (Amounts to be deducted should be indicated by a minus sign.) |
references
|Financial Statement |Difficulty: 3 Hard | |
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7.
value:
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|Prepare an after-closing trial balance as of December 31. |
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