RENT-ME INCORPORATED On December 1, Year 1, Jack and Diane Jones formed a corporation Rent-Me Incorporated. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Cabot Trail Rentals, an equipment rental company that was going out of business. The newly formed company uses the following accounts. Cash Contributed Capital Accounts Receivable Retained Earnings Prepaid Rent Dividends Prepaid Insurance Rental Fees Earned (Revenue) Office Supplies Office Supplies Expense Rental Equipment Salaries Expense Accumulated Depreciation: Rental Equipment Maintenance Expense Notes Payable Utilities Expense Accounts Payable Rent Expense Interest Payable Depreciation Expense Salaries Payable Interest Expense Dividends Payable Income Taxes Expense Unearned Rental Fees (Liability) Income Taxes Payable 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 Jack and Diane Jones 20,000 shares of capital stock inexchange for a total of $210,000 cash. Dec. 1 Purchased for $288,000 all of the equipment formerly owned by Cabot Trail Rentals. Paid $168,000 cash and issued a 1-year note payable for $120,000. The note, plus all 12 months of accrued interest, are due November 30, Year 2. Dec. 1 Purchased office supplies on account from Connors Basics, $1,200. Payment due in 30 days. (Upon pick up Diane exclaimed, I dont know why Jack ordered so many supplies these will last us several months!) Dec. 4 Paid $14,400 to Cape Breton Realty as three months advance rent on the rental yard and office formerly occupied by Cabot Trail Rentals. Dec. 8 Received $9,600 cash as advance payment on equipment rental from RD Construction Company. Dec. 12 Paid salaries for the first two weeks in December, $6,240. Dec. 15 Excluding the RD Construction Company advance, equipment rental fees earned during the first 15 days of December amounted to $21,600, of which $14,400 was received in cash. Dec. 17 Rented a backhoe to Sydney Landscaping at a price of $300 per day, to be paid when the backhoe is returned. Sydney Landscaping expects to keepthe backhoe for about two or three weeks. Dec. 23 Collected $2,400 of the accounts receivable recorded on December 15. Dec. 26 Purchased on account from Earth Movers, Inc., $720 in parts needed to repair a rental tractor. Payment is due in 10 days. Dec. 26 Paid biweekly salaries, $6,240. Dec. 27 Paid the account payable to Earth Movers, Inc., $720. Dec. 28 Declared a dividend of 12 cents per share, payable on January 15, Year 2. Dec. 29 Purchased a 12-month public liability insurance policy for $11,520. This policy protects the company against liability for injuries and property damage caused by its equipment. The policy goes into effect on January 1, Year 2. Dec. 31 Received a bill from Nova Scotia Power 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 $18,720 was received in cash. Data for Adjusting Entries a. Office supplies on hand at December 31 are estimated at $720. b. The annual interest rate on the note payable to Cabot Trail Rentals is 6 percent. c. The rental equipment is being depreciated by the straight-line method over aperiod of eight years. d. The advance payment of rent on December 1 covered a period of three months. e. During December, the company earned $4,440 of the rental fees paid in advanceby RD Construction Company on December 8. f. Salaries earned by employees since the last payroll date (December 26) amounted to $1,680 at month-end. g. As of December 31, six days rent on the backhoe rented to Sydney Landscapingon December 26 has been earned. h. It is estimated that the company is subject to a combined federal and provincial income tax rate of 40 percent of income before income taxes. These taxes willbe payable in Year 2