During December, the company earned $$4,440$ of the rental fees paid in advance by McNamer Construction Company on December $8.$

As of December $31,$ six days$$ rent on the backhoe rented to Mission Landscaping on December $26$ has been earned.

Salaries earned by employees since the last payroll date $($December $26)$ amounted to $$1,680$ at month$-$end.

It is estimated that the company is subject to a combined federal and state income tax rate of $40$ percent of income before income taxes $($total revenue minus all expenses other than income taxes$).$ These taxes will be payable in Year $2.$

Instructions

Perform the following steps of the accounting cycle for the month of December, Year $1.$

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

Post the December transactions to the appropriate ledger accounts.

Prepare the unadjusted trial balance columns of a $10-$column worksheet for the year ended December $31.$

Prepare the necessary adjusting entries on December $31.$

Post the December adjusting entries to the appropriate ledger accounts.

Complete the $10-$column worksheet for the year ended December $31.$

Prepare an income statement and statement of retained earnings for the year ended December $31,$ and a balance sheet as of December $31,$ Year $1.$

Page $249$

Prepare required disclosures to accompany the financial statements dated December $31,$ Year $1.$ Your disclosures should include separate write$-$ups addressing each of the following areas: $(1)$ depreciation policy, $(2)$ maturity dates of major liabilities, and $(3)$ potential liability due to pending litigation.

Prepare closing entries and post them to ledger accounts.

Prepare an after$-$closing trial balance as of December $31,$ Year $1.$

During December, the company$$s cash balance fell from $$240,000$ to $$78,000.$ Does this imply that the business is headed for insolvency in the near future? Explain your reasoning.

Would it be ethical for Susan Li to maintain the accounting records for this company, or must they be maintained by someone who is independent of the organization?