$1.$ On September $1,2022,$ Anthony and Christine Ferrara formed a corporation called Tony$$s Rentals, Inc., for the purpose of operating an equipment rental yard. 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 corporation closes its accounts and prepares financial statements at the end of each month.

During September, the corporation entered into the following transactions:

Sept. $1$ Issued to Anthony and Christine Ferrara $20,000$ shares of capital stock in exchange for a total of $$80,000$ cash.

Sept. $1$ Purchased for $$180,000$ all of the equipment formerly owned by Rent$-$It$.$ Paid $$70,000$ cash and issued a one$-$year note payable for $$110,000,$ plus interest at the annual rate of $9\%.$

Sept. $1$ Paid $$9,000$ to Shapiro Realty as three months$$ advance rent on the rental yard and office formerly occupied by Rent$-$It$.$

Sept. $4$ Purchased office supplies on account from Modern Office Co$.,$ $$1,630.$ Payment due in $30$ days.

Sept. $8$ Received $$10,000$ cash as advance payment on equipment rental from McBryan Construction

Company.

Sept. $12$ Paid salaries for the first two weeks in September, $$3,600.$

Sept. $15$ Excluding the McBryan advance, equipment rental fees earned during the first $15$ days of September amounted to $$8,100,$ of which $$6,800$ was received in cash.

Sept. $17$ Purchased on account from Earth Movers, Inc., $$340$ in parts needed to repair a rental tractor. $($Debit an expense account.$)$ Payment is due in $10$ days.

Sept. $23$ Collected $$210$ of the accounts receivable recorded on September $15.$

Sept. $25$ Rented a backhoe to Mission Landscaping at a price of $$100$ per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

Sept. $26$ Paid biweekly salaries, $$3,600.$

Sept. $27$ Paid the account payable to Earth Movers, Inc., $$340.$

Sept. $28$ Declared a dividend of $10$ cents per share, payable on October $15.$

Sept. $29$ Tony$$s Rentals was named, along with Mission Landscaping and Collier Construction, as a co$-$defendant in a $$25,000$ 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 September $26,$ 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.

Sept. $29$ Purchased a $12-$month public$-$liability insurance policy for $$2,700.$ This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes into effect on October $1,$ and affords no coverage for the injuries sustained by Kevin Davenport on September $26.$

Sept. $30$ Received a bill from Universal Utilities for the month of September, $$270.$ Payment is due in $30$ days.

Sept. $30$ Equipment rental fees earned during the second half of September and received in cash amounted to $$8,450.$

Other Information

a$.$ The advance payment of rent on September $1$ covered a period of three months.

b$.$ Interest accrued on the note payable to Rent$-$It amounted to $$825$ at September $30.$

c$.$ The rental equipment is being depreciated by the straight$-$line method over a period of $10$ years.

d$.$ Office supplies on hand at September $30$ are estimated at $$1,100.$

e$.$ During September, the company earned $$4,840$ of the rental fees paid in advance by McBryan Construction Co$.$ on September $8.$

f$.$ As of September $30,$ Tony$$s Rentals has earned five days$$ rent on the backhoe rented to Mission Landscaping on September $25.$

g$.$ Salaries earned by employees since the last payroll date $($September $26)$ amounted to $$900$ at month$-$end.

h$.$ It is estimated that Tony$$s Rentals is subject to a combined federal and state income tax rate of $40\%$ of income before income taxes $($total revenue minus all expenses other than income taxes$).$ These taxes will be payable on December $15.$

Instructions

Prepare an income statement and balance sheet for September.