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:

December $1$ Issued to Wayne and Susan Li $20,000$ shares of capital stock in exchange for a total of $$240,000$ cash.

December $1$ Purchased for $$288,000$ all of the equipment formerly owned by Rent$-$It$.$ Paid $$168,000$ cash and issued a one$-$year note payable for $$120,000.$ The note, plus all $12$ months of accrued interest, are due November $30,$ Year $2.$

December $1$ Paid $$14,400$ to Shapiro Realty as three months$$ advance rent on the rental yard and office formerly occupied by Rent$-$It$.$

December $4$ Purchased office supplies on account from Modern Office Company, $$1,200.$ Payment due in $30$ days. $($These supplies are expected to last for several months; debit the Office Supplies asset account.$)$

December $8$ Received $$9,600$ cash as advance payment on equipment rental from McNamer Construction Company. $($Credit Unearned Rental Fees.$)$

December $12$ Paid salaries of $$6,240$ for the first two weeks in December.

December $15$ Excluding the McNamer advance, equipment rental fees earned during the first $15$ days of December amounted to $$21,600,$ of which $$14,400$ was received in cash.

December $17$ Purchased on account from Earth Movers, Incorporated, $$720$ in parts needed to perform basic maintenance on a rental tractor. Payment is due in $10$ days.

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

December $26$ Rented a backhoe to Mission Landscaping at a price of $$300$ per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

December $26$ Paid biweekly salaries, $$6,240.$

December $27$ Paid the account payable to Earth Movers, Incorporated, $$720.$

December $28$ Declared a dividend of $12$ cents per share, payable on January $15,$ Year $2.($Hint: Credit the Dividends Payable account.$)$

December $29$ French Broad Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co$-$defendant in a $$30,000$ lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had left the rented backhoe in a fenced construction site owned by Collier Construction. After working hours on December $26,$ Davenport had climbed the fence to play on parked construction equipment. While playing on the backhoe, he fell and broke his arm. The extent of the company$$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 the notes accompanying the statements.$)$

December $29$ 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. However, the policy goes into effect on January $1,$ Year $2,$ and affords no coverage for the injuries sustained by Kevin Davenport on December $26.$

December $31$ Received a bill from Universal Utilities for the month of December, $$840.$ Payment is due in $30$ days.

December $31$ 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 in Year $1$

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

The annual interest rate on the note payable to Rent$-$It is $6$ percent.

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.

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

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 $2.$

Required:

$1-$a$.$ Journalize the December transactions. Do not record adjusting entries at this point.

$1-$b$.$ Prepare the necessary adjusting entries for December.

$1-$c$.$ Prepare closing entries and post to ledger accounts.