In professional format, prepare an income statement and statement of retained earnings for the year ended December 31, and a balance sheet as of December 31.

Dec. 1 Issued to Michael and Bridgette OMalley 20,000 shares of capital stock in exchange for a total of $200,000 cash.

Dec. 1 Purchased for $240,000 all of the equipment formally owned by a competitor named Achill, LLP. Paid $140,000 cash and issued a one year note payable for $100,000. The note, plus all 12 months of accrued interest, are due November 30, 2016.

Dec. 1 Paid $12,000 to Corrigan Realty as three months advance rent

on the rental yard and office formerly occupied by Achill, LLP.

Dec. 4 Purchased office supplies on account from the Castlebar Office Company for $1,000. Payment due in 30 days. (These supplies are expected to last for several months.)

Dec. 8 Received $8,000 cash as advance payment on equipment rental from McGinty Construction Company.

Dec. 12 Paid salaries for the first two weeks in December of $5,200.

Dec. 15 Excluding the McGinty advance, equipment rental fees earned during the first 15 days of December amounted to $18,000, of which $12,000 was received in cash.

Dec. 17 Purchased on account from Donegal, LLP, $600 in parts needed to repair a rental tractor. Payment is due in 10 days.

Dec. 23 Collected $2,000 of the accounts receivable recorded on December 15.

Dec. 26 Rented a backhoe to Dever Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Dever Landscaping expects to keep the backhoe for about two or three weeks.

Dec. 26 Paid biweekly salaries, $5,200.

Dec. 27 Paid the account payable to Donegal, LLP, $600.

Dec. 28 Declared a dividend of 10 cents per share, payable on January 15, 2016.

Dec. 29 East Tonregee, LLC was named, along with Dever Landscaping and Westport Construction as a co-defendant in a $25,000 lawsuit filed. Dever Landscaping had left the rented backhoe in a fenced construction site owned by Westport Construction. After working hours on December 26, kids had climbed the fence to play on parked construction equipment. While playing on the backhoe, one fell and broke his arm. The extent of the companys legal and financial responsibility for this accident, if any, cannot be determined at this time.

Dec. 29 Purchased a 12 month public liability insurance policy for $9,600. This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes into effect on January 1, 2016, and affords no coverage for the injuries sustained by the kids on December 26.

Dec. 31 Received a bill from Curran Utilities for the month of December for $700. Payment is due in 30 days.

Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,000, of which $15,600 was received in cash.

Data for Adjusting Entries:

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

The annual interest rate on the note payable to Achill, LLP is 6 percent.

The rental equipment is being depreciated by the straight-line method over a period of 8 years.

Office supplies on hand at December 31 are estimated at $600.

During December, the company earned $3,700 of the rental fees paid in advance by McGinty Construction Company on December 8.

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

Salaries earned by employees since the last payroll date (December 26) amounted to $1,400 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 2016.