1-a. Journalize the December transactions. Do not record adjusting entries at this point.

1-b. Prepare the necessary adjusting entries for December.

1-c. Prepare closing entries and post to ledger accounts

Required Information [The following information applies to the questions disployed below.] On December 1, Year 1, John and Patty Driver formed o corporation colled Susquehonno Equipment Rentals. The new corporation was oble to begin operstions immedistely by purchssing the sssets and taking over the location of Rent-lt, on equipment rental compony thet wos going out of business. The newly formed compony uses the following occounts. The corporation performs sdjusting entries monthly. Closing entries are performed snnusly on December 31. During December of its first year of operotions, the corporation entered into the following tronsactions. Dec. 1 Issucd to John and Patty Driver 21, eea shares of capital stock in exchange for a total of \$21e, epe cash. Dec. 1 Purchased for $192, eae all of the equipment fornerly owned by Rent-It. Paid $131, eee cash and issucd a 1 -year note payable for \$51, eae. The note, plus all 12 months of accrued interest, are due November 38, Year 2. Dec. 1 Paid $9,390 to shapiro Realty as three months' advance rent on the rental yard and office formerly occupicd by Rent-it. Dec. 4 Purchased office supplies on account fron Modern office C0., \$1,3ee. Paynent due in 38 days. (These supplies are expected to last for several nonths; debit the office supplies asset account.) Dec. 8 Received $8,408 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fecs.) Dec.12 Paid salaries of $5,109 for the first two weeks in Decerber. Dec.15 Excluding the McNamer advance, equipnent rental fecs earned during the first 15 days of December anounted to $18,700, of which $12,100 was received in cash. Dec.17 Purchased on account from Earth Movers, Inc., $990 in parts necded to perform basic maintenance on a rental tractor. Payment is due in 10 days. Dec. 23 Collected $2,2 e of the accounts receivable recorded on December 15 . Dec.26 Rented a backhoe to Mission Landscaping at a price of $390 per day, to be paid when the backhoe is returned. Mission Landscaping expects to kecp the backhoe for about two or three wecks. Dec. 26 Paid biwekly salaries, $5,108. Dec. 27 Paid the account payabie to Earth Movers, Inc., $890. Dec.28 Declared a dividend of 10 cents per share, payable on January 15, Year 2. Dec.29 Susquchanna Equipment Rentals was naned, along with Mission Landscaping and collier Construction, as a codefendant in a \$28, eae 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 Decerber 26 , Davenport had climbed the fence to play on parked construction equipnent. While playing on the backhoe, he fell and broke his arn. The extent of the compony's legal and financial responsibility for this accident, if any, cannot be determined at this tine. (Note: This event does not nequire a journal entry at this tine, but may require disclosure in notes accompanying the statements.) Dec.29 Purchased a 12-month public liability insurance policy for \$9,120. This policy protects the conpany against liability for injuries and property danage caused by its equipnent. However, the policy goes into effect on January 1, Year 2, and affords no coverage for the injuries sustained by Kevin Davenport on Decerber 26. Dec.31 Received a bill fron Universal Utilities for the nonth of Decenber, \$6ge. Paynent is due in 39 days. Dec.31 Equipment rental fees carned during the second half of Decerber amounted to $2,5ee, of which $16, eee was received in cash. Data for Adjusting Entrles In Year 1 a. The odvonce poyment of rent on December 1 covered o period of three months. b. The onnusl interest rate on the note poysble to Rent-lt is 6 percent. c. The rental equipment is being deprecioted by the stroight-line method over a period of eight years. Any solvoge value at the end of its useful life is expected to be negligible and immaterial. d. Office supplies on hand at December 31 are estimated at $610. e. During December, the compony earned $4,400 of the rental fees poid in odvonce by McNomer Construction Compony on December 8 . f. As of December 31, six doys' rent on the bockhoe rented to Mission Londscoping on December 26 hos been earned. g. Salories earned by employees since the last poyroll date (December 26 ) omounted to $1,800 at month-end. h. It is estimsted that the compony is subject to 0 combined federal and state income tox rate of 40 percent of income before income toxes (total revenue minus all expenses other thon income toxes). These toxes will be poyable in Year 2