On 1 December 2013, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation
Posted: Sat Mar 19, 2022 5:44 pm
On 1 December 2013, 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 31
December. During December, the corporation entered into the
following transactions:
Issued to John and Patty Driver 30,000 new shares in exchange
for a total of $300,000 cash.
Purchased for $268,800 all of the equipment formerly owned by
Rent-It. Paid $132,000 cash and issued a one-year note payable for
$136,800. The notes, plus all 12-months of accrued interest, are
due 30 November 2013.
Paid $9,300 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.,
$2,000. Payment due in 30 days. (These supplies are expected to
last for several months; debit the Office Supplies asset
account.)
Received $8,100 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 $18,800, of which
$12,800 was received in cash.
Purchased on account from Earth Movers Limited, $700 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
$27,000 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 26
December, 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
$8,640. This policy protects the company against liability for
injuries and property damage caused by its equipment. However, the
policy goes into effect on 1 January 2014, and affords no coverage
for the injuries sustained by Kevin Davenport on 26 December.
Received a bill from Universal Utilities for the month of
December, $660. Payment is due in 30 days.
Equipment rental fees earned during the second half of December
amounted to $20,400, of which $16,100 was received in cash.
During December, the company earned $3,900 of the rental fees
paid in advance by McNamer Construction Co.on 8 December.
As of 31 December, six days’ rent on the backhoe rented to
Mission Landscaping on 26 December has been earned.
Salaries earned by employees since the last payroll date (26
December) amounted to $1,000 at month-end.
It is estimated that the company is subject to an income tax
rate of 30 percent of profit before income taxes (total revenue
minus all expenses other than income taxes). These taxes will be
payable in 2014.
2.
Prepare the necessary adjusting entries for December.
3.Prepare closing entries and post to ledger accounts
4.Post the entries into the following ledger accounts.
cash,Accounts ,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,Share Capital,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
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 31
December. During December, the corporation entered into the
following transactions:
Issued to John and Patty Driver 30,000 new shares in exchange
for a total of $300,000 cash.
Purchased for $268,800 all of the equipment formerly owned by
Rent-It. Paid $132,000 cash and issued a one-year note payable for
$136,800. The notes, plus all 12-months of accrued interest, are
due 30 November 2013.
Paid $9,300 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.,
$2,000. Payment due in 30 days. (These supplies are expected to
last for several months; debit the Office Supplies asset
account.)
Received $8,100 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 $18,800, of which
$12,800 was received in cash.
Purchased on account from Earth Movers Limited, $700 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
$27,000 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 26
December, 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
$8,640. This policy protects the company against liability for
injuries and property damage caused by its equipment. However, the
policy goes into effect on 1 January 2014, and affords no coverage
for the injuries sustained by Kevin Davenport on 26 December.
Received a bill from Universal Utilities for the month of
December, $660. Payment is due in 30 days.
Equipment rental fees earned during the second half of December
amounted to $20,400, of which $16,100 was received in cash.
During December, the company earned $3,900 of the rental fees
paid in advance by McNamer Construction Co.on 8 December.
As of 31 December, six days’ rent on the backhoe rented to
Mission Landscaping on 26 December has been earned.
Salaries earned by employees since the last payroll date (26
December) amounted to $1,000 at month-end.
It is estimated that the company is subject to an income tax
rate of 30 percent of profit before income taxes (total revenue
minus all expenses other than income taxes). These taxes will be
payable in 2014.
2.
Prepare the necessary adjusting entries for December.
3.Prepare closing entries and post to ledger accounts
4.Post the entries into the following ledger accounts.
cash,Accounts ,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,Share Capital,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