Assignment #1 Value 5%

On December 1, 2021, George and Myra started a corporation called Caper Rental Equipment. The new corporation began operations immediately as they were able to purchase assets from a local company called The Rental Place that went out of business. The newly opened business, Caper Rental Equipment, uses the following accounts for their operations:

Cash

Accounts Receivable Prepaid Rent

Unexpired Insurance Office Supplies

Rental Equipment Accumulated Depreciation: Rental Equipment

Notes Payable

Interest Expense

Accounts Payable Interest Payable Salaries Payable Dividends Payable Unearned Rental Fees Income Taxes Payable Contributed Capital

Retained Earnings Income Tax Expense

Dividends

Rental Fees Earned Salaries Expense Maintenance Expense Utilities Expense

Office Supplies Expense Rent Expense

Depreciation Expense

Caper Rental Equipment performs adjusting entries monthly. Closing entries are performed annually on December 31st. During December, the company entered the following transactions:

December 1st. Issued 20,000 shares of contributed capital in exchange for $200,000 cash.

December 1st. Purchased all of the equipment formerly owned by The Rental Place for $240,000.

Paid $140,000 cash and signed a two year note payable for the balance.

December 1st. Paid $12,000 for three months rent. The rental period begins December 1 and ends

February 28th.

December 4th. Purchased office supplies on account for $1,000. Payment is due in 30 days.

December 8th. Received $8,000 cash as an advance payment on equipment rental from Joe

MacDonald for their construction company.

December 12th. Paid Salaries for the first two weeks in December totalling $5,200.

December 15th. Excluding the December 8th rental, total equipment rentals up to December 15th

were $18,000; of which, $12,000 was received in cash and the remainder is an accounts receivable.

December 17th. Purchased $600 in parts needed to repair equipment (maintenance expense).

Purchased the parts on account.

December 23rd. Collected $2,000 of the accounts receivable recorded on December 15th.

December 26th. Paid biweekly salaries $5,200

December 27th. Paid $600 towards an accounts payable balance

December 28th. Declared a dividend of 10 cents per share, payable on January 15th, 2022.

December 29th.Purchased a 12-month insurance policy for $9,600. They paid cash for the policy and

it begins January 1, 2022 and ends December 31, 2022.

December 29th. Received a utility bill for $700 for the month of December. Payment is due in 30

days.

December 31st. Equipment rental fees earned during the second half of December totalled $20,000

of which, $15,600 was collected in cash.

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Additional Data Provided:

The advance payment of rent on December 1st covered a period of 3 months (December to February)

The rental equipment purchased is being depreciated on a straight-line basis over 8 years.

Office supplies on hand on December 31st total $600.

During December, the company earned $3,700 of the rental fees paid by Joe MacDonald on

December 8th.

Salaries earned by the employees from December 26th to December 31st totalled $1,400. This will

not be paid until the next pay day January 9th.

Requirements:

1. Prepare journal entries for the December transactions. Descriptions are not required. You do not need to prepare adjusting entries in requirement 1.

2. Using the additional data provided, prepare the required adjusting journal entries for December 31st.

3. Prepare an income statement for the year ended December 31st, 2021.

4. Prepare a statement of retained earnings for the year ended December 31st, 2021.

5. Prepare a balance sheet as at December 31st, 2021.