Question

In September, the company entered the following transactions:

Sept. 1 Issued common shares to Tony Ferria and other investors in exchange for                       $100,000 cash.

Sept 1 Paid $9,000 to Wellington Realty as three months’ advance rent on the rental yard and     office formerly occupied by Rent-It

Sept 1 Purchased for $180,000 all the equipment formerly owned by Rent-It. Paid $70,000         cash and issued a one-year note payable for $110,000, plus interest at the        annual rate of 9%. This rental equipment is estimated to have a 10-year useful life.

Sept 4 Purchased office supplies on account from Modern Office Co., $1,630.     Payment due in 30 days. (These supplies are expected to last for several          months.)

Sept 8 Received $10,000 cash from McFadden Construction Co. as advance payment for            equipment rental.

Sept 12            Paid salaries for the first two weeks in September, $3,600.

Sept 15            Excluding the McFadden advance, equipment rental fees earned during the first 15 days of September amounted to $6,100, of which $5,300 was received in cash and $800 was         an account receivable.

Sept 17            Purchased on account from Earth Movers, Inc., $340 in parts needed to repair a rental       tractor. Payment is due in 10 days.

Sept 23            Collected $210 of the accounts receivable recorded on September 15.

Sept 26            Rented a backhoe to Mission Landscaping at a price of $100 per day, to be paid when      the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

Sept 26            Paid biweekly salaries, $3,600.

Sept 27            Paid the account payable to Earth Movers, Inc., $340.

Sept 28       Paid dividends of $2,000 cash.

Sept 30            Received a bill for utilities expense for the month of September, $270. Payment is due     in 30 days.

Sept 30            Cash received from equipment rental during the second half of September, $6,450.

The information available on September 30 is as follows: the office supplies on hand are estimated at $1,100; $4,840 of the advance payment from McFadden Construction Co. has been earned; salaries earned by employees since the last payroll are $900.

Instructions:

1. Prepare journal entries for the above transactions in September and post the transactions to the ledger, using T-accounts and adding any new accounts which you need. You may omit narratives to the journal entries.
2. Prepare adjusting journal entries and post the adjustments to the T-accounts, adding any new accounts which you need. Note that some of the adjusting entries can be derived from the information provided in the various transactions from   September 1 to September 30, in addition to the information available on September 30.
3. Prepare a statement of earnings (income statement) for the month of September in good form.
4. Prepare a statement of retained earnings for the month of September in good form.
5. Prepare a classified statement of financial position (balance sheet) as of September 30 in good form.
6. Prepare closing entries as of September 30.

Answer 1