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Comprehensive Problem $1($Static$)$

$[$The following information applies to the questions displayed below.$]$

On December $1,$ Year $1,$ 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$-$lt$,$ an

equipment rental company that was going out of business. The newly formed company uses the following accounts.

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

Unearned 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

The corporation performs adjusting entries monthly. Closing entries are performed annually on December $31.$ During

December of its first year of operations, the corporation entered into the following transactions.

Dec. $1$ Issued to John and Patty Driver $20,000$ shares of capital stock in exchange for a total of $$240,000$

cash.

Dec. $1$ Purchased for $$288,000$ all of the equipment formerly owned by Rent$-$It$.$ Paid $$168,000$ cash and issued a

$1-$year note payable for $$120,000.$ The note, plus all $12$ months of accrued interest, are due November

$30,$ Year $2.$

Dec. $1$ Paid $$14,400$ 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$.,$ $$1,200.$ Payment due in $30$ days. $($These

supplies are expected to last for several months; debit the office Supplies asset account.$)$

Dec. $8$ Received $$9,600$ cash as advance payment on equipment rental from McNamer Construction Company. $($Credit

Unearned Rental Fees.$)$

Dec. $12$ Paid salaries of $$6,240$ for the first two weeks in December.

Dec. $15$ Excluding the McNamer advance, equipment rental fees earned during the first $15$ days of December

amounted to $$21,600,$ of which $$14,400$ was received in cash.

Dec. $17$ Purchased on account from Earth Movers, Inc., $$720$ in parts needed to perform basic maintenance on a

rental tractor. 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 $$300$ 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, $$6,240.$

Dec. $27$ Paid the account payable to Earth Movers, Inc., $$720.$

Dec. $28$ Declared a dividend of $12$ cents per share, payable on January $15,$ Year $2.$

Dec. $29$ Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a

co$-$defendant in a $$30,000$ 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 $$11,520.$ This policy protects the company

against liability for injuries and property damage caused by its equipment. However, the policy goes

into effect on January $1,$ Year $2,$ 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, $$840.$ Payment is due in $30$ days.

Dec. $31$ Equipment rental fees earned during the second half of December amounted to $$24,000,$ of which $$18,720$

was received in cash.

Data for Adjusting Entries in Year $1$

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 equ

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