On December 1, 2015, John and Patty Driver formed a corporation called Susquehan
ID: 2576852 • Letter: O
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:
The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions:
Issued to John and Patty Driver 20,000 shares of capital stock in exchange for a total of $200,000 cash.
Purchased for $240,000 all of the equipment formerly owned by Rent-It. Paid $140,000 cash and issued a one-year note payable for $100,000. The note, plus all 12-months of accrued interest, are due November 30, 2016.
Paid $12,000 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It.
Purchased office supplies on account from Modern Office Co., $1,000. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.)
Received $8,000 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.)
Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,000, of which $12,000 was received in cash.
Purchased on account from Earth Movers, Inc., $600 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days.
Rented a backhoe to Mission Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.
Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co-defendant in a $25,000 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.)
Purchased a 12-month public-liability insurance policy for $9,600. 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.
Received a bill from Universal Utilities for the month of December, $700. Payment is due in 30 days.
Equipment rental fees earned during the second half of December amounted to $20,000, of which $15,600 was received in cash.
During December, the company earned $3,700 of the rental fees paid in advance by McNamer Construction Company on December 8.
As of December 31, six days’ rent on the backhoe rented to Mission Landscaping on December 26 has been earned.
Salaries earned by employees since the last payroll date (December 26) amounted to $1,400 at month-end.
It is estimated that the company is subject to a combined federal and state income tax rate of 40 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be payable in 2016.
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:
ve Problem × On December 1, 2015, J/X C Not secure |e tpx?-0.9730689298805856 1511198125812 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.) SUSQUEHANNA EQUIPMENT RENTALS Worksheet December 31, 2015 Trial Balance Adjustments Balance Sheet Adjusted Trial Balance Debit Income Statement Debit Credit Debit Credit Credit Debit Credit Debit Credit Balance sheet accounts: Cash Accounts receivable Prepaid rent Unexpired insurance Office supplies Rental equipment Notes payable payable Unearned rental fees Dividends payable Capital stock Retained earnings Dividends Interest payable Accumulated depreciation: rental equipment Salaries payable Income taxes payable Inenme etatoment arcnunte 11/20/2017Explanation / Answer
Date Accounts Title Dr Cr 1-Dec Cash $200,000 Capital stock $200,000 1-Dec Rental Equipment $240,000 Cash $140,000 Notes Payable 100000 1-Dec Prepaid Rent $12,000 Cash $12,000 4-Dec Office Supplies $1,000 Accounts Payable $1,000 8-Dec Cash $8,000 Unearned Rental fees $8,000 12-Dec Salaries expenses $5,200 Cash $5,200 15-Dec Cash $12,000 Accounts Receivable 6000 Rental fees earned 18000 17-Dec Maitanence Expenses $600 Accounts payable $600 23-Dec Cash $2,000 Accounts Receivable $2,000 26-Dec No entry 26-Dec Salaries expenses $5,200 Cash $5,200 27-Dec Accounts payable $600 Cash $600 28-Dec Cash dividend $2,000 Dividend payable (20000*.1) $2,000 29-Dec No entry 29-Dec Unexpired Insurance $9,600 Cash $9,600 31-Dec Utilities expenses $700 Accounts payable $700 31-Dec Cash $15,600 Accounts Receivable 4400 Rental fees earned 20000 Adjusting entries a) Rent expenses $4,000 Prepaid Rent (12000/3) $4,000 b) Interest expenses $500 Interest payable (100000*6%*1/12) $500 c) Depreciation expenses $2,500 Accumulated depreciation: Rental equipmen $2,500 (240000/8*1/12) d) Supples expenses $400 Office Supplies $400 e) Unearned Rental fees $3,700 Rental fees earned $3,700 f) Accounts Receivable (6*250) $1,500 Rental fees earned $1,500 g) Salaries expenses $1,400 Salaries payable $1,400 h) Income Tax expenses $9,080.0 Income Tax payable $9,080.0 working Income statement Rental fees earned $43,200 Less: Salaries expenses $11,800 Maitanence Expenses $600 Utilities expenses $700 Rent expenses $4,000 Depreciation expenses $2,500 Supples expenses $400 Interest expenses $500 Total expenses $20,500 Income before taxes $22,700 Less: income tax 40% $9,080.0 Net income $13,620.0 ans Closing Entries Dr Cr 1) Rental fees earned $43,200 Income summary $43,200 2) Income summary $29,580 Salaries expenses $11,800 Maitanence Expenses $600 Utilities expenses $700 Rent expenses $4,000 Depreciation expenses $2,500 Supples expenses $400 Interest expenses $500 Income tax expenses $9,080 3) Income summary $13,620 Retained Eranings $13,620 4) Retained Eranings 2000 Cash Dividend 2000 Trial balance Ajustments 2500 Income staement Balance sheet Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr Cash $65,000 $65,000 $65,000 Accounts Receivable $8,400 1500 $9,900 $9,900 Unexpired Insurance $9,600 $9,600 $9,600 Prepaid Rent $12,000 4000 $8,000 $8,000 Office Supplies $1,000 400 $600 $600 Rental Equipment $240,000 $240,000 $240,000 Accumulated depreciation: Rental equipmen 2500 $2,500 $2,500 Notes payable $100,000 $100,000 $100,000 Accounts payable $1,700 $1,700 $1,700 Unearned Rental fees $8,000 3700 $4,300 $4,300 Dividend Payable 2000 $2,000 $2,000 Capital stock 200000 $200,000 $200,000 Retained Earnings $11,620 Dividends 2000 2000 Salaries payable 1400 $1,400 $1,400 Interest payable 500 $500 $500 Income tax payable $9,080.0 $9,080 $9,080 Rental Fees earned 38000 5200 $43,200 $43,200 Salaries expenses $10,400 1400 $11,800 $11,800 Maitanence Expenses $600 $600 $600 Utilities expenses 700 $700 $700 Rent expenses $4,000 $4,000 $4,000 Depreciation expenses $2,500 $2,500 $2,500 Supples expenses $400 $400 $400 Interest expenses 500 $500 $500 Income before taxes $9,080.0 $9,080 $9,080 Net income $13,620 Total $349,700 $349,700 $23,080 $23,080 $364,680 $364,680 $43,200 $43,200 $333,100 $333,100
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