QUESTION:

Ali Baba formed a corporation called Super Equipment Rentals on December 1, 2020. The new corporation was able to begin operations immediately by purchasing all

the assets and taking over the location of Rent-It, an equipment rental company which was going out of business.

The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions:

Dec. 1 Issued to Fatty Boy 20,000 shares of capital stock at an issue price of 15 per share.

Dec. 2 Paid $158,000 cash and issued a 12 months note payable for the balance to buy equipment OF

$288,000 in which the note will paid in full together with interest at the end of 1 year.

Dec. 3 Paid quarterly rental of $4,800 per month in one lump sum to Shogun as three months advance rent on the rental yard and office formerly occupied by Shogun.

Dec. 7 Purchased office stationery from Popular Book Store for $1,200 on credit.

Dec. 10 McDonald Company paid $9600 in advance for equipment rental.

Dec. 13 Paid two weeks salaries to employees, $6,240.

Dec. 15 Equipment rental fees earned from Mc Donald during the first 15 days of December amounted to $21,600, of which $14,400 was received in cash.

Dec. 18 Purchased on account from Tiong Nam Inc., $720 in parts needed to repair a rental tractor. Payment is due in 10 days.

Dec. 23 Collected $2,400 of the accounts receivable recorded on December 15.

Dec. 26 Rented a backhoe to Mission Impossible at a price of $2100 per 7 days week, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe

for about two or three weeks.

Dec. 26 Paid 2 weeks salaries, $6,240.

Dec. 27 Paid the account payable to Tiong Ham Inc., $600.

Dec. 28 Declared a dividend of 12 cents per share, payable in January 2021.

Dec. 29 Received a bill from Universal Utilities for the month of December, $840. Payment is due in 30 days.

Dec. 31 Equipment rental fees earned during the second half of December amounted to

$24,000, of which $15,600 was received in cash.

additional information:

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.

d. Office supplies on hand at December 31 are estimated at $720.

e. During December, the company earned $4,440 of the rental fees

paid in advance by McDonald Company on December 10.

f. 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 $1,680 at month-end.

h. 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 2021.

question:

1. Complete the 10-column worksheet for the month ended Dec 31. (30 marks)

2. Prepare an income statement and statement of retained earnings for the year ended December 31, and a balance sheet (in report form) as of December 31, 2020 (20 marks)

Worksheet for the Unadjusted Trial Balan DR CR Adjustment DR CR Adjusted trial balance Income Statement DR CR DR CR Balance Sheet DR CR