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[The following information applies to the questions displayed below) On December 1, Year 1, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. 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 newly formed company uses the following accounts. Capital Stock Retained Earnings Dividends Income Summary Rental Fees Earned Salaries Expense Cash Accounts Receivable Prepaid Rent Unexpired Insurance Office Supplies Rental Equipment Accusulated Depreciation Rental Equipment Notes Payable Accounts Payable Interest Payable Salaries Payable Dividends Payable Unearned Rental Fees Income Taxes Payable Maintenance Expense utilities Expense Rent Expense Office Supplies Exgense Depreciation Expense Interest Expense Income Taxes Expense The corporation performs adjusting entries monthly Closing entries are performed annually on December 31. During December of its first year of operations, the corporation entered into the following transactions. Dec. 1 Issued to John and Patty Driver 21,000 shares of capital stock in exchange for a total of $210,888 cash. Dec. 1 Purchased for $249,600 all of the equipment formerly owned by Rent-It. Paid $135,000 cash and issued a 1-year note payable for $114,680. The note, plus all 12 months of accrued interest, are due November 30, Year 2 Dec. 1 Paid $11,788 to Shapiro Realty as three months advance rent on the rental yard and office forserly occupied by Rent-It. Dec. 4 Purchased office supplies on account from Modern Office Co., 51,688. Payment due in 30 days. (These supplies are expected to last for several months debit the Office Supplies asset account.) Dec. 8 Received 59,808 cash as advance payment on equipment rental from McNaner Construction Company. (Credit Unearned Rental Fees.) Dec. 12 Paid salaries of $4,908 for the first two weeks in December. Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,880, of which $12,800 was received in cash. Dec. 17 Purchased on account from Earth Movers, Inc., 51,eee in parts needed to perform basic maintenance on a rental tractor. Payment is due in 10 days. Dec. 23 collected $2,Bee of the accounts receivable recorded on December 15 Dec.26 Rented a backhoe to Mission Landscaping at a price of $330 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks. Dec.26 Paid biweekly salaries, 54,900. Dec. 27 Paid the account payable to Earth Movers, Inc., $1,800 Dec. 28 Declared > dividend of 10 cents per share, payable on January 15, Year 2. Dec. 29 Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction as a co- defendant in a $21,098 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 December 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. (Note: This event does not require a journal entry at this time, but may require disclosure in notes accompanying the statements.) Dec 29 Purchased a 12-month public liability insurance policy for $9,000. 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, Year 2, and affords no coverage for the injuries sustained by Kevin Davenport on December 26. Dec.31 Received a bill from Universal Utilities for the month of December, 5680. Payment is due in 30 days Dec.31 Equipment rental fees earned during the second half of December amounted to $21.000, of which $15.70 was received in cash a. The advance payment of rent on December 1 covered a period of three months. b. The annual Interest rate on the note payable to Rent-It Is 6 percent. c. The rental equipment is being depreciated by the straight-line method over a period of eight years. Any salvage 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 company earned $3,900 of the rental fees pald in advance by McNamer Construction Company on December 8 t. As of December 31, six days' rent on the backhoe rented to Mission Landscaping on December 26 has been earned. g. Salaries earned by employees since the last payroll date (December 26) amounted to $1.500 at month-end. h. It is estimated that the company is subject to a combined federal and state income tax rate of 30 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be payable In Year 2. x Answer is not complete. SUSQUEHANNA EQUIPMENT RENTALS Income Statement For the Year Ended December 31, Year 1 Revenue: Rental fees earned $ 45,680 Expenses Salaries expense 11.300 680 Utilities expense Rent expense 3.900 573 2,600 Interest expense Depreciation expense Office supplies expense Maintenance expense 000 >> 1.000 $ 21,043 $ 24,637 7.391 $ 17.246 Income taxes expense CONTENTRIES Work Deart al Madra Dean C De Tea Som Cr DEDE $ OG ER 5 000 CB 3 500 11700 1.800 3.800 000 0001 10:400 7800 0.000 010 33 AC 10,50 7.300 0:00 610 240.000 006 240.000 300 5 14600 FENO DSC2 2000 Balance sheet accounts: Casa Accounts receivable Prepaid rent Unapred insurance Office supplies Ramal Notes payable Accounts payable Ledenfees Dividende at Capital stock Rating Dividende Interest Accumulated deprecorrentes Saare payable income payable Income statement accounts Rentals and Ses experts Macap 3 COO 2200 5100 2100 250.000 21001 210,000 5700 2.100 210.000 2100 21001 2017 DES 2.000 1600 522 2800 1500 TID 2.800 1000 1562 30.000 5.000 COD 5 17010 098 000 1300 5 1000 wadau 0001 110 DATO CO2 298 SE COT B Rent lepenie Deprecang O DE 5.000 511 2.000 2000 2000 200 00
