On December 1, 2015, John and Patty Driver formed a corporation called Susquehan

Question

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 25,000 shares of capital stock in exchange for a total of $250,000 cash.

Dec. 1 Purchased for $230,400 all of the equipment formerly owned by Rent-It. Paid $136,000 cash and issued a one-year note payable for $94,400. The note, plus all 12-months of accrued interest, are due November 30, 2016.

Dec. 1 Paid $10,200 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., $1,100. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.)

Dec. 8 Received $8,000 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, $4,900.

Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,900, of which $12,100 was received in cash.

Dec. 17 Purchased on account from Earth Movers, Inc., $700 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days.

Dec. 23 Collected $2,800 of the accounts receivable recorded on December 15.

Dec. 26 Rented a backhoe to Mission Landscaping at a price of $320 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, $4,900.

Dec. 27 Paid the account payable to Earth Movers, Inc., $700.

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 $23,000 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 $8,760. 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, $600. Payment is due in 30 days.

Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,900, of which $15,900 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 $650.

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 $1,700 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.

1.Journalize the December transactions. Do not record adjusting entries at this point.

2.Prepare the necessary adjusting entries for December.

3. Prepare Closing entries and post to ledger accounts

4. Complete the 10-column worksheet for the year ended December 31

5. Prepare an income statement for the year ended December 31

6. Prepare a statement of retained earnings as of December 31

7. Prepare a balance sheet as of December 31

8. Prepare a After-closing trial balance as of December 31

Explanation / Answer

Dec.1

ToEquity Share Capital Account $25000

                ( Amrount brought as a capital and Equity share capital issued in this behalf )

To Sundry Credtors A/c$230400

                ( Rental Equipment Purchased )

To Cash A/c$136000

                ( Amount paid to the creditors of Equipments )

To Notes Payable A/c$ 94400

                ( Notes issued to the creditors of Rental Equipments )

To Cash $ 10200

                ( Advance rent paid to the creditors of Rental yard and office )

Dec.4

To Cash A/c$ 1100

                ( Office Supply purchased )

Dec 8

ToUnearned Rental Fees$ 8000

                ( Rental Fees received in Advance )

Dec 12

To Cash $ 4900

                ( Salary Expenses for the first two week )

Dec 15

ToRental Fees A/c$ 18900

                (Rental Fees earned for the first 15 Days )

To Account Receivable A/c Dr.$12100

Dec.17

To Earth Movers, Inc . A.c $ 700

Dec.23

To Account Receivable A/c $ 2800

Dec 26

To Cash A/c $ 4900

Dec 27

To Cash A/c $ 700

Dec 29

To Cash $ 8760

Dec 31

To Accounts Receivable ( Universal Utilities )$ 600

To Rental Fees $ 20900

Adjusting Entries for the month of December

Prepaid Rent A/c Dr.$ 6800

To Shapiro Realty A/c Dr.$ 10200

To Interest Payable A/c$ 472

To Notes payable A/c $ 472

To Office Supply A/c$ 450

To Rental Fees A/c $ 4200

To Salaries Payable$ 1700

Closing Entries of the year

To Rental Equipments $ 2800

To Dividend Payable A/c $ 25000

         2     Dividend Payable A/c Dr.                                                             $ 25000

                                                To Shareholders A/c                                                                       $ 25000

Dear Student

             The question is too long to answer in time. I have prepare the working in excel but i can not past it to the answer sheet. I have just prepared only journal entry .

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