a.
General Journal
December Daily Transactions
Dec 1 Cash $ 400,000
Capital Stock $ 400,000
Owner invested cash in the business.
1 Rental Equipment $ 260,000
Cash $ 160,000
Notes Payable $ 100,000
Purchased equipment from Rent-it. Note payable
is due in one year.
1 Prepaid Rent $ 15,000
Cash $ 15,000
Paid three months' rent in advance to Shapiro
Realty.
4 Office Supplies $ 3,000
Accounts Payable $ 3,000
Purchased supplies on account; payment due in
30 days.
8 Cash $ 10,000
Unearned Rental Fees $ 10,000
Received advance payment for equipment rental
by McNamer Construction Company.
12 Salaries Expense $ 10,200
Cash $ 10,200
Paid salaries for first two weeks in December.
15 Cash $ 12,000
Accounts Receivable $ 16,000
Rental Fees Earned $ 28,000
17 Maintenance Expense $ 1,600
Accounts Payable $ 1,600
To record purchase of repair parts on account
from Earth Movers, Inc.; payment due in 10 days.
23 Cash $ 6,000
Accounts Receivable $ 6,000
Collection of an accounts receivable.
26 (No entry required to record rental of backhoe.)
Dec 26 Salaries Expense $ 10,200
Cash $ 10,200
Paid biweekly payroll.
27 Accounts Payable $ 1,600
Cash $ 1,600
Paid account payable to Earth Movers, Inc.
28 Dividends $ 4,000
Dividends Payable $ 4,000
Declared a dividend of 20 cents per share payable
on January 1
29 (No journal entry required to record lawsuit.)
29 Unexpired Insurance $ 9,600
Cash $ 9,600
Purchased 12-month liability policy, effective
31 Utilities Expense $ 700
Accounts Payable $ 700
Utilities for December; payment due in 30 days.
31 Cash $ 15,600
Accounts Receivable $ 4,400
Rental Fees Earned $ 20,000
To record rental fees earned in the second half
of December.
General Journal
(Adjusting Entries)
Dec 31 Rent Expense $ 5,000
Prepaid Rent $ 5,000
To recognize rent expense (15000*1/3)
31 Interest Expense $ 500
Interest Payable $ 500
Interest on note payable to Rent-It ($100,000 x 6%
x 1/12).
31 Depreciation Expense $ 2,708
Accumulated Depreciation: Rental Equip. $ 2,708
($260,000 ÷ 8 years x 1/12)
31 Office Supplies Expense $ 2,400
Office Supplies $ 2,400
(3000-600)
31 Unearned Rental Fees $ 3,700
Rental Fees Earned $ 3,700
To record portion of advance payment by McNamer
Construction Co. earned during December.
31 Accounts Receivable $ 1,500
Rental Fees Earned $ 1,500
To record fees earned from Mission Landscaping
on backhoe rental (6 days x $250 per day).
31 Salaries Expense $ 1,400
Salaries Payable $ 1,400
To record accrued salaries payable at month-end.
31 Income Taxes Expense $ 7,397
Income Taxes Payable $ 7,397
closing entries
31 Service revenue $ 53,200
Income summary $ 53,200
31 Income summary $ 42,105
Salaries Expense $ 21,800
Maintenance Expense $ 1,600
Utilities Expense $ 700
Rent Expense $ 5,000
Office Supplies Expense $ 2,400
Depreciation Expense $ 2,708
Interest Expense $ 500
Income tax exp. $ 7,397
31 Income summary $ 11,095
Retained earnings $ 11,095
31 Retained earnings $ 4,000
Dividends $ 4,000
Cash
Date Explanation Debit Credit Balance
Dec 1 400,000 400,000
1 160,000 240,000
1 15,000 225,000
8 10,000 235,000
12 10,200 224,800
15 12,000 236,800
23 6,000 242,800
26 10,200 232,600
27 $ 1,600 231,000
29 9,600 221,400
31 15,600 237,000
Accounts Receivable
Date Explanation Debit Credit Balance
Dec 15 16,000 16,000
23 6,000 10,000
31 4,400 14,400
31 1,500 15,900
Prepaid Rent
Date Explanation Debit Credit Balance
Dec 1 15,000 15,000
31 5,000 10,000
Unexpired Insurance
Date Explanation Debit Credit Balance
Dec 29 9,600 9,600
Office Supplies
Date Explanation Debit Credit Balance
Dec 4 3,000 3,000
31 $ 2,400 600
a. Rental Equipment
Date Explanation Debit Credit Balance
Dec 1 260,000 260,000
Accumulated Depreciation: Rental Equipment
Date Explanation Debit Credit Balance
Dec 31 2,708 2,708
Notes Payable
Date Explanation Debit Credit Balance
Dec 1 100,000 100,000
Accounts Payable
Date Explanation Debit Credit Balance
Dec 4 3,000 3,000
17 $ 1,600 4,600
27 $ 1,600 3,000
31 $ 700 3,700
Interest Payable
Date Explanation Debit Credit Balance
Dec 31 $ 500 500
a. Salaries Payable
Date Explanation Debit Credit Balance
Dec 31 1,400 1,400
Dividends Payable
Date Explanation Debit Credit Balance
Dec 28 4,000 4,000
Unearned Rental Fees
Date Explanation Debit Credit Balance
Dec 8 10,000 10,000
31 3,700 6,300
Income Taxes Payable
Date Explanation Debit Credit Balance
Dec 31 7,397 7,397
Capital Stock
Date Explanation Debit Credit Balance
Dec 1 400,000 400,000
Maintenance Expense
Date Explanation Debit Credit Balance
Dec 17 $ 1,600 1600
30 to close $ 1,600 0
Utilities Expense
Date Explanation Debit Credit Balance
Dec 31 $ 700 700
31 to close $ 700 0
Rent Expense
Date Explanation Debit Credit Balance
Dec 31 5,000 5,000
31 to close 5,000 0
Office Supplies Expense
Date Explanation Debit Credit Balance
Dec 31 $ 2,400 2400
31 to close $ 2,400 0
a. & d. Depreciation Expense
Date Explanation Debit Credit Balance
Dec 31 2,708 2,708
31 to close 2,708 0
Interest Expense
Date Explanation Debit Credit Balance
Dec 31 $ 500 500
31 to close $ 500 0
Income Taxes Expense
Date Explanation Debit Credit Balance
Dec 31 7,397 0 7,397
31 to close 7,397
Dividends
Date Explanation Debit Credit Balance
Dec 28 4,000 4,000
31 to close 4,000 0
Rental Fees Earned
Date Explanation Debit Credit Balance
Dec 15 28,000 28,000
31 20,000 48,000
31 3,700 51,700
31 1,500 53,200
31 to close 53,200 0
Salaries Expense
Date Explanation Debit Credit Balance
Dec 12 10,200 10,200
26 10,200 20,400
31 1,400 21,800
31 to close 21,800 0
Income statement
Revenues $ 53,200
Salaries Expense $ (21,800)
Maintenance Expense $ (1,600)
Utilities Expense $ (700)
Rent Expense $ (5,000)
Office Supplies Expense $ (2,400)
Depreciation Expense $ (2,708)
Interest Expense $ (500)
Net Income $ 18,492
Tax @40% $ 7,397
Net profit $ 11,095
Balance sheet
current assets
Cash $ 237,000
Accounts receivable $ 15,900
Prepaid rent $ 10,000
Unexpired insurance $ 9,600
Office supplies $ 600
Total current assets $ 273,100
Rental equipment $ 260,000
Less:accumulated dep $ (2,708) $ 257,292
Total assets $ 530,392
Current liabilties
Notes Payable $ 100,000
Accounts Payable $ 3,700
Interest Payable $ 500
Salaries Payable $ 1,400
Dividends Payable $ 4,000
Unearned Rental Fees $ 6,300
Income Taxes Payable $ 7,397
Total current liabilties $ 123,297
Stockholder's equity
Capital Stock $ 400,000
Retained earnings $ 7,095
Total Stockholder's equity $ 407,095
Total liabilities & equity $ 530,392
Statement of retained earnings
Opening balance $ -
Add:net income $ 11,095
Less:dividends $ (4,000)
Closing balance $ 7,095
Post closing trial balance
items debit credit
Cash $ 237,000
Accounts receivable $ 15,900
Prepaid rent $ 10,000
Unexpired insurance $ 9,600
Office supplies $ 600
Rental equipment $ 260,000
Accumulated dep $ 2,708
Notes Payable $ 100,000
Accounts Payable $ 3,700
Interest Payable $ 500
Salaries Payable $ 1,400
Dividends Payable $ 4,000
Unearned Rental Fees $ 6,300
Income Taxes Payable $ 7,397
Capital Stock $ 400,000
Retained earnings $ 7,095
totals $ 533,100 $ 533,100
Note 1—Depreciation policies
Depreciation expense in the financial statements is computed by the straight-line method. The estimated useful life of the rental
equipment is 8 years.
Note 2—Maturity dates of liabilities
The Company’s notes payable consist of a single obligation which matures on November 30, 2012. The maturity value of this note,
including interest, will amount to $106,000.
Note 3—Pending litigation
The Company has been named as a co-defendant in a $25,000 personal injury lawsuit. The extent of legal and financial responsibility, if
any, cannot be determined at this time.
the business was able to generate $5,000 of positive cash flow from operations at end of december.the company's working capital
position is actually negative by $25,880 ($93,100 of current assets minus $118,980 of current liabilities). Likewise, its current ratio is
only 0.78:1 ($93,100 of current assets divided by $118,980 of current liabilities). However, if the business can continue to generate at
least $5,000 of positive operating cash flows each month, remaining solvent should not pose a serious issue.
There is nothing at all unethical about Patty Drivermaintaining the accounting records for Susquehanna Equipment Rentals. In most
businesses, the accounting records are maintained either by propeitors. Most important Is that all accounting records are captured
chronologicaly
