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On December 1, Year 1, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent-it, an equipment rental company that was going out of business. The newly formed company uses the following accounts. Cash Accounts Receivable Prepaid Rent Unexpired Insurance Office Supplies Rental Equipment Accumulated Depreciation: Rental Equipment Notes Payable Accounts Payable Interest Payable Salaries Payable Dividends Payable Unearned Rental Fees Income Taxes Payable Capital Stock Retained Earnings Dividends Income Summary Rental Fees Earned Salaries Expense Maintenance Expense Utilities Expense Rent Expense Office Supplies Expinse Depreciation Expense Interest Expense Income Taxes Expense 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. Dec. 1 Issued to John and Patty Driver 20,000 shares of capital stock in exchange for a total of $240,wee cash. Dec. 1 Purchased for $288,000 all of the equipment formerly owned by Rent-It. 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 Paid $14,400 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 59,600 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.) Dec. 12 Paid salaries of $6,240 for the first two weeks in December. Dec. 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. Dec. 17 Purchased on account fron Earth Movers, Inc., $720 in parts needed to perform basic maintenance on 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 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. Dec. 26 Paid biweekly salaries, $6,240. Dec. 27 Paid the account payable to Earth Movers, Inc. $728. Dec. 28 Declared a dividend of 12 cents per share, payable on January 15, Year 2. Dec.29 Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Constructionas 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 requires 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 $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 Dec. 31 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 $18,728 was received in cash. Data for Adjusting Entries in Year 1 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. Any salvage value at the end of its useful life is expected to be negligible and Immaterial 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 McNamer Construction Company on December 8 1. 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 Year 2. Requirement General Journal General Ledger Trial Balance Income Statement Statement of Retained Earnings Balance Sheet Analysis Answer the questions based on your work in the previous tabs Requirement General Journal General Ledger Trial Balance Income Statement Statement of Retained Earnings Balance Sheet Analysis General Journal Tab - Prepare the journal entries to record the December transactions (the transacions are numbered 1-17). Prepare any necessary adjusting and closing entries (the adjusting entries are numbered 18-25, the closing entries are numbered 26-29). Remember, you can view the unadjusted, adjusted or post-closing General Ledger and financial statements by selecting the view in the dropdown. Viewing the unadjusted trial balance will be helpful as you prepare your adjusting entries, viewing the adjusted trial balance will be helpful as you prepare your closing entries General Ledger Tab - To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab. Note that you will be able to view the unadjusted, adjusted, or post-closing balances by selecting from the dropdown choices. Trial Balance Tab - Remember, total debits should always equal total credits. Note that you will be able to view the unadjusted, adjusted, or post-closing balances by selecting from the dropdown button Income Statement Tab - Use the dropdowns to select the accounts properly included on the income statement. Note that you will be able to view the unadjusted, adjusted, or post-closing balances by selecting from the dropdown choices The unadjusted, adjusted or post-closing balances will appear for each account, based on your selection Statement of Retained Earnings Tab - The unadjusted, adjusted or post-closing balances will appear for each account, based on your selection Balance Sheet Tab - Use the dropdowns to select the accounts properly included on the balance sheet. Note that you will be able to view the unadjusted, adjusted, or post-closing balances by selecting from the dropdown choices. The unadjusted, adjusted or post-closing balances will appear for each account, based on your selection. Analysis Tab - Answer the questions based on your work in the previous tabs. Trial Balance Balance Sheet General Statement of General Requirement Income Retained Journal Analysis Ledger Statement Earnings Every journal entry must keep the accounting equation in balance. Prepare the journal entries for each of the transactions entering the debits before the credits. Each transaction will automatically be posted to the General Ledger as soon as yo "Record Entry". Once you have reviewed the results then record the adjusting entries (18-25), and then the closing entries a 29). If no journal entry is required, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 1 2 3 4 5 6 09 7 co 29 Record the issuance of cash. Note: Enter debits before credits. Date General Journal Debit Credit Dec 01 Record entry Clear entry View general journal es General Statement of Requirement General Income Journal Trial Balance Retained Balance Sheet Ledger Statement Analysis Earnings Each Journal entry is posted automatically to the general ledger. Click on any of the individual amounts to return to the underlying journal entry. Choose the unadjusted, adjusted and post-closing selection from the dropdowns Unadjusted General Ledger Account Data is not available until journal entries have been entered, Trial Balance General Requirement General Statement of Income Retained Journal Ledger Balance Sheet Analysis Statement Earnings Choose from the dropdown the view you wish to see; unadjusted, adjusted, or post-closing. Year 2019 represents Year 1 from the problem statement. Unadjusted SUSQUEHANNA EQUIPMENT RENTALS Trial Balance December 31, 2019 Account Title Debit Credit Total 0$ 0 (General Ledger Income Statement Statement of General General Income Requirement Trial Balance Retained Balance Sheet Analysis Journal Ledger Statement Earnings Use the drop-downs to select the accounts properly included on the income statement. The unadjusted, adjusted, or post- closing balances will appear for each account, based on your selection Unadjusted SUSQUEHANNA EQUIPMENT RENTALS Income Statement For the Year Ended December 31, Year 1 Revenue Expenses Statement of General Requirement General Income Trial Balance Retained Balance Sheet Analysis Journal Ledger Statement Earnings The unadjusted or adjusted balances will appear for each account, based on your selection. (Selecting Post-Closing will display ending balance only.) Unadjusted SUSQUEHANNA EQUIPMENT RENTALS Statement of Retainod Earnings For the Year Ended December 31, Year 1 Retained earnings. December 1. Year 1 $ 0 0 Retained earnings, December 31, Year 1 Income Statement Balance Sheet > Unadjusted SUSQUEHANNA EQUIPMENT RENTALS Balance Sheet December 31, Year 1 Assets Rental equipment Total assets Liabilities & Stockholders' equity Liabilities: Total liabilities Stockholders' equity: Total stockholders' equity Total liabilities and stockholders' equity Statement of Retained Earnings Balance Sheet General Requirement General Income Trial Balance Journal Ledger Statement Answer the questions based on your work in the previous tabs. Analysis During December, the company's cash balance fell from S240,000 to $78,000. Does this imply that the business is headed for insolvency in the near future? Would it be ethical for Patty Driver to maintain the accounting records for this company, or must they be maintained by someone who is independent of the organization? (Balance Sheet

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