Question

In: Accounting

The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December,...

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 John and Patty Driver 27,000 shares of capital stock in exchange for a total of $270,000 cash.
Dec. 1 Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $138,000 cash and issued a 1-year note payable for $63,600. The note, plus all 12 months of accrued interest, are due November 30, Year 2.
Dec. 1 Paid $9,300 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent-It.
Dec. 4 Purchased office supplies on account from Modern Office Co., $1,200. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.)
Dec. 8 Received $8,500 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.)
Dec. 12 Paid salaries for the first two weeks in December, $4,900.
Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,600, of which $12,100 was received in cash.
Dec. 17 Purchased on account from Earth Movers, Inc., $600 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days.
Dec. 23 Collected $2,200 of the accounts receivable recorded on December 15.
Dec. 26 Rented a backhoe to Mission Landscaping at a price of $250 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, $4,900.
Dec. 27 Paid the account payable to Earth Movers, Inc., $600.
Dec. 28 Declared a 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 $24,000 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 notes accompanying the statements.)
Dec. 29 Purchased a 12-month public liability insurance policy for $9,120. 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, $680. Payment is due in 30 days.
Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,600, of which $15,900 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 Rent-It is 6 percent.

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

Office supplies on hand at December 31 are estimated at $620.

During December, the company earned $4,600 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 $1,900 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.

Comprehensive Problem 1 Part 3

Complete the 10-column worksheet for the year ended December 31. (For accounts where multiple Adjustments are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Round your final answers to the nearest whole dollar.)

Solutions

Expert Solution

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Date Account Debit Credit
Dec 1 Cash $ 270,000
Dec 1 Capital Stock $ 270,000
Dec 1 Rental Equipment $ 201,600
Dec 1 Cash $ 138,000
Dec 1 Note Payable $   63,600
Dec 1 Prepaid Rent $     9,300
Dec 1 Cash $     9,300
Dec 4 Office Supplies $     1,200
Dec 4 Accounts Payable $     1,200
Dec 8 Cash $     8,500
Dec 8 Unearned Rental Fee $     8,500
Dec 12 Salaries Expense $     4,900
Dec 12 Cash $     4,900
Dec 15 Cash $   12,100
Dec 15 Accounts Receivable $     6,500
Dec 15 Rental Fee Earned $   18,600
Dec 17 Maintenance Expense $         600
Dec 17 Accounts Payable $         600
Dec 23 Cash $     2,200
Dec 23 Accounts Receivable $     2,200
Dec 26 Salaries Expense $     4,900
Dec 26 Cash $     4,900
Dec 27 Accounts Payable $         600
Dec 27 Cash $         600
Dec 28 Dividends $     2,700 27000*0.1
Dec 28 Dividend Payable $     2,700
Dec 29 Unexpired Insurance $     9,120
Dec 29 Cash $     9,120
Dec 31 Utilities Expense $         680
Dec 31 Accounts Payable $         680
Dec 31 Cash $   15,900
Dec 31 Accounts Receivable $     4,700
Dec 31 Rental Fee Earned $   20,600
Adjusting Entries:
Date Account Debit Credit
a Rent Expense $     3,100 9300/3*1
a Prepaid Rent $     3,100
b Interest Expense $         318 63600*6%*1/12
b Interest Payable $         318
c Depreciation Expense $     2,100 201600/8*1/12
c Accumulated Depreciation $     2,100
d Office Supplies Expense $         580 1200-620
d Office Supplies $         580
e Unearned Rental Fee $     4,600
e Rental Fee Earned $     4,600
f Accounts Receivable $     1,500 250*6 days
f Rental Fee Earned $     1,500
g Salaries Expense $     1,900
g Salaries Payable $     1,900
h Income Tax Expense $ 10,489
h Income Tax Payable $ 10,489
Adjusted Trial Balance
Unadjusted Adjustments Adjusted Income Statement Balance Sheet
Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash $     141,880 $       141,880 $141,880
Accounts Receivable $         9,000 $           1,500 $         10,500 $ 10,500
Office supplies $         1,200 $              580 $              620 $        620
Prepaid Rent $         9,300 $           3,100 $           6,200 $    6,200
Unexpired Insurance $         9,120 $           9,120 $    9,120
Rental Equipment $     201,600 $       201,600 $201,600
Accumulated Depreciation $           2,100 $           2,100 $    2,100
Accounts Payable $           1,880 $           1,880 $    1,880
Salaries Payable $           1,900 $           1,900 $    1,900
Income Tax Payable $           7,377 $         10,489 $ 10,489
Note Payable $         63,600 $         63,600 $ 63,600
Unearned Rental Fee $           8,500 $           4,600 $           3,900 $    3,900
Interest Payable $              318 $              318 $        318
Dividend Payable $           2,700 $           2,700 $    2,700
Capital Stock $       270,000 $       270,000 $270,000
Retained Earnings $                 -  
Dividends $         2,700 $           2,700 $                 -   $    2,700
Rental Fee Earned $         39,200 $           6,100 $         45,300 $   45,300
Utilities Expense $            680 $              680 $         680
Maintenance Expense $            600 $              600 $         600
Salaries Expense $         9,800 $           1,900 $         11,700 $   11,700
Office Supplies Expense $              580 $              580 $         580
Income Tax Expenses $           7,377 $         10,489 $   10,489
Rent Expense $           3,100 $           3,100 $     3,100
Depreciation Expense $           2,100 $           2,100 $     2,100
Interest Expense $              318 $              318 $         318
Total $     385,880 $       385,880 $         21,475 $         21,475 $       402,187 $       402,187 $   29,567 $   45,300 $372,620 $356,887
Net Income $   15,733 $ 15,733
Grand Total $372,620 $372,620
Income Statement:
Rent revenue $         45,300
Less operating expenses:
Utilities Expense $            680
Maintenance Expense $            600
Salaries Expense $       11,700
Office Supplies Expense $            580
Rent Expense $         3,100
Depreciation Expense $         2,100
Total Operating Expenses: $         18,760
Net Operating Income $         26,540
Less: Interest Expense $              318
Income before taxes $         26,222
Less income taxes 40% $         10,489
Net income $         15,733
Statement of Retained Earning:
Begingin Retained Earning $                 -  
Add: Net Income $         15,733
Less: Dividends $           2,700
Ending Retained Earning $         13,033
Balance Sheet:
Cash $       141,880
Accounts receivable $         10,500
Office Supplies $              620
Prepaid Rent $           6,200
Unexpired Insurance $           9,120
Total Current assets $       168,320
Rental Equipment $     201,600
Accumulated Depreciation $        -2,100 $       199,500
Total Assets $       367,820
Liabilities:
Accounts Payable $           1,880
Salaries Payable $           1,900
Income Tax Payable $         10,489
Note Payable $         63,600
Unearned Rental Fee $           3,900
Interest Payable $              318
Dividend Payable $           2,700
Current Liabilities $         84,787
Total liabilities $         84,787
Stockholders’equity:
Capital stock (27,000 shares outstanding) $       270,000
Retained earnings $         13,033
Total stockholders’ equity $       283,033
Total liabilities and stockholders’ equity $       367,820

Related Solutions

The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December,...
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 John and Patty Driver 27,000 shares of capital stock in exchange for a total of $270,000 cash. Dec. 1 Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $138,000 cash and issued a 1-year note payable for $63,600. The note, plus all 12 months of accrued interest, are due November...
The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December,...
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 John and Patty Driver 27,000 shares of capital stock in exchange for a total of $270,000 cash. Dec. 1 Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $138,000 cash and issued a 1-year note payable for $63,600. The note, plus all 12 months of accrued interest, are due November...
The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December,...
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 John and Patty Driver 27,000 shares of capital stock in exchange for a total of $270,000 cash. Dec. 1 Purchased for $201,600 all of the equipment formerly owned by Rent-It. Paid $138,000 cash and issued a 1-year note payable for $63,600. The note, plus all 12 months of accrued interest, are due November...
During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered...
During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent ownership of Case Products on January 1, 20X6, for $56,000, at which time Case Products reported retained earnings of $14,000 and capital stock outstanding of $27,000. The differential was attributable to patents with a life of eight years. Income and dividends of...
During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered...
During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent ownership of Case Products on January 1, 20X6, for $58,000, at which time Case Products reported retained earnings of $11,000 and capital stock outstanding of $29,000. The differential was attributable to patents with a life of eight years. Income and dividends of...
Journalize the attached adjusting entries Prepare the necessary adjusting entries at December 31 for Staples, Inc....
Journalize the attached adjusting entries Prepare the necessary adjusting entries at December 31 for Staples, Inc. based on the information from problem 1 and the following information: 1. On November 1, 2013 the company borrowed 65,000 from a bank. The note requires principal and interest at 10% to be paid on April 30, 2014. 2. On December 1, 2013 the company received $3,000 in cash from another company that is renting office space in Staples’ building. The payment, representing rent...
Adjusting entries are prepared yearly. (T/F) Closing entries are prepared monthly. (T/F) It is not really...
Adjusting entries are prepared yearly. (T/F) Closing entries are prepared monthly. (T/F) It is not really necessary to do a post closing trial balance because it's the end of the year. (T/F) Adjusting entries record transactions. (T/F) Beginning capital is $10,000. Net loss of $2,000. Withdrew $1,000. Balance of the owner's capital account on the post closing trial balance would be $10,000. (T/F)
The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a...
The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2014 Jan. 4. Purchased a used delivery truck for $26,960, paying cash. Nov. 2. Paid garage $600 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual...
The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a...
The following transactions, adjusting entries, and closing entries were completed by Legacy Furniture Co. during a three-year period. All are related to the use of delivery equipment. The double-declining-balance method of depreciation is used. 2014 Jan. 4. Purchased a used delivery truck for $26,960, paying cash. Nov. 2. Paid garage $600 for miscellaneous repairs to the truck. Dec. 31. Recorded depreciation on the truck for the year. The estimated useful life of the truck is four years, with a residual...
Adjusting entries Hahn Flooring Company uses a perpetual inventory system. Journalize the December 31 adjusting entries...
Adjusting entries Hahn Flooring Company uses a perpetual inventory system. Journalize the December 31 adjusting entries based upon the following: a. Sales returns of $125,000 and merchandise returns of $80,000 are estimated for the current year's sales. B. The inventory account has a balance of $1,333,150, while physical inventory indicates that $1,309,900 of merchandise is on hand. Assume any shrinkage is a normal amount.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT