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:

Dec. 1 Issued to John and Patty Driver 23,000 shares of capital stock in exchange for a total of $230,000cash.
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, aredue November 30, 2016.
Dec. 1 Paid $9,900 to Shapiro Realty as three months’ advance rent on the rental yard and office formerlyoccupied 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 ConstructionCompany. (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 ofDecember 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 backhoeis 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 CollierConstruction, as a co-defendant in a $27,000 lawsuit filed on behalf of Kevin Davenport. MissionLandscaping had left the rented backhoe in a fenced construction site owned by CollierConstruction. After working hours on December 26, Davenport had climbed the fence to play onparked construction equipment. While playing on the backhoe, he fell and broke his arm. Theextent of the company’s legal and financial responsibility for this accident, if any, cannot bedetermined at this time. ( Note: This event does not require a journal entry at this time, but mayrequire disclosure in notes accompanying the statements.)
Dec. 29 Purchased a 12-month public-liability insurance policy for $9,120. This policy protects the companyagainst liability for injuries and property damage caused by its equipment. However, the policygoes into effect on January 1, 2016, and affords no coverage for the injuries sustained by KevinDavenport on December 26.
Dec. 31 Received a bill from Universal Utilities for the month of December, $690. Payment is due in 30days.
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 McNamerConstruction Company on December 8.
f. As of December 31, six days’ rent on the backhoe rented to Mission Landscaping on December 26 hasbeen earned.
g. Salaries earned by employees since the last payroll date (December 26) amounted to $1,900 at monthend.
h. It is estimated that the company is subject to a combined federal and state income tax rate of 30 percentof income before income taxes (total revenue minus all expenses other than income taxes). These taxeswill be payable in 2016

Transcribed Image Text:

Cash Accounts receivable Prepaid rent Unexpired insurance Office supplies Rental equipment Accumulated depreciation: Rental equipment Notes payable Accounts payable Interest payable Salaries payable Dividends payable Uneamed rental fees Income taxes payable Capital stock Retained earnings Dividends Income summary Rental fees earned Salaries expense Maintenance expense Utilities expense Rent expense Office supplies expense Depreciation expense Interest expense Income taxes expense Cash Accounts receivable Prepaid rent Unexpired insurance Office supplies Rental equipment Accumulated depreciation: Rental equipment Notes payable Accounts payable Interest payable Salaries payable Dividends payable Uneamed rental fees Income taxes payable Capital stock Retained earnings Dividends Income summary Rental fees earned Salaries expense Maintenance expense Utilities expense Rent expense Office supplies expense Depreciation expense Interest expense Income taxes expense

Answer rating: 100% (QA)

Dec 1 Dr Cash 230000 Cr Capital Stock 230000 Dec 1 Dr Cash 136000 Dr Notes Payable 65600 Cr Rental E... View the full answer