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Sir Rent-A-Lot Equipment Rental Inc. On August 31, Year 2. Arthur Camelot and his wife Guinevere formed a corporation in Pennsylvania. The purpose of this business was to rent tools and construction equipment to homeowners and contractors. They purchased the assets of an existing--but failing business (MR ALL THUMBS Inc) and began operations immediately. They have a little accounting experience (from the halcyon days of their youth when they were both students at the Fox School) and have decided to use the following chart of accounts for Sir Rents-A-Lot Inc. Account Name Cash Accounts Receivable Prepaid Rent Prepaid Insurance Office Supplies Rental Equipment Accumulated Depreciation Rental Equipment Notes Payable Accounts Payable Interest Payable Salaries Payable Dividends Payable Unearned Rental Fees (Unearned Revenue) Income Taxes Payable Account Name Common Stock Retained Earnings Dividends Income Summary Rental Fees Earned (Service Revenue) Salaries Expense Maintenance Expense Utilities Expense Rent Expense Office Supplies Expense Depreciation Expense Interest Expense Income Taxes Expense Sir Rent-A-Lot closes its accounts and prepares financial statements at the end of each month. During Sept (their first month of operations) they had the following transactions Date Sept 1 Year 2 Sept 1 Year 2 Sept 1 Year 2 Sept 4. Year 2 Sept 5. Year 2 Sept 8. Year 2 Transaction or Event 25.000 shares of common stock issued in exchange for $125.000 cash Purchased all of the equipment owned by "MR ALL THUMBS." The equipment that was bought had a fair market value of $300,000 but the price that the equipment was purchased for was $270,000 They signed a thres-year 9% note payable and paid $110.000 cash. Paid rent to Liacouras Realty Company for 3 months of $12,000. They are occupying the same space as "MR ALL THUMBS Purchased from - Office Max-office supplies worth $1,750 on account. Payment terms are 2/10 net 30. They expect that these supplies will last for several months. Hired a new secretary assistant, his annual salary is $32,000 per year plus a benefit package that is annually worth $7,000. Received an advance payment from Digger Dell Co. $11.000 cash. Use a liability account. Paid the salaries for the first two weeks of Sept. $5,250, Excluding the advance from Digger O'Dell Company, $10,000 was earned. The amount of cash received was $6,000. The remaining S4000 is recorded as Account Receivable. Purchased repair parts from Caterpillar Inc. that are worth $500. Terms are net 10. or the accounts receivable recorded on Sept 15th, $4,000 was collected Rented a front-end leader to Landscrapers, Inc at a $250 per day rate. Landscrapers, Inc. will settle their account when they return the loader. They expect to keep it about two or three weeks Paid the salaries for the two weeks ended Sept. 26. 55.250. Paid Caterpillar Inc. in the full amount $500 A dividend was declared, which they intend to pay at SO.10 per Sept 12. Year 2 Sept 15. Year 2 Sept 17. Year 2 Sept 23, Year 2 Sept 25 Year 2 Sept 26, Year 2 Sept 27. Year 2 Sept 28, Year 2 Sept 28, Year 2 are by the end of the year when he fell off of t Sept 29, Year 2 Sept 29, Year 2 A child was slightly injured when he fell off of the front-end loader that was rented to Landscrapers Inc. The child is the only son of a Lawyer and an orthopedic surgeon. They have filed a lawsuit at $250,000 against both Landscrapers and Sir-Rent-A-Lot. The actual liability for the accident has not yet been determined Purchased a one-year public liability insurance policy for $5,000. The policy becomes effective at 12:01 am October 1. Year 2 Received the Sept utility bill that amounted to $775. It is due no Later than October 15th For the last two weeks of Sept, they carned $15.000, or the $15,000, Sept 30, Year 2 Sept 30. Year 2 the amount of cash received amounted to $6.750. Adjusting Entries Date Sept 30, Year 2 Sept 30, Year 2 Sept 30, Year 2 Transaction or Event The rent paid to Liacouras Agency was for 3 months. Interest accrued on the note payable was $1,000 at the end of the month Rental equipment is being depreciated over 15 years. The Camelots have chosen to use the straight-line method of depreciation. At the end of the month supplies worth $1,250 were on hand. Sept 30, Year 2 Sept 30, Year 2 Sept 30, Year 2 Sept 30, Year 2 During the month, Digger O'Dell had used $6,000 of rental equipment By the end of the month, Landscrapers Inc. had not returned the backhoe. (5days *$250) Salaries earned by employees amounted to $1,500 since the last payroll date (Sept 26th). The Camelots have consulted with their independent accountant, Woody Cheatum (a senior partner at the firm of Dewey, Cheatum and Howe P.C.) and he advised them that they are likely subject to a combined local, state, & federal tax rate of 40% The taxes will be paid by December 15. Sept 30, Year 2 Instructions 1-Journalize ( in good form the above transactions. 2- Post to ledger accounts 3. Prepare adjusting and closing entries and post to ledger accounts. 4. Prepare an income statement and a statement of retained earnings for the month of Sept, and a balance sheet as of Sept 30

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