Susquehanna Euipment Rentals

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COMPREHENSIVE PROBLEM 1 SUSQUEHANNA EQUIPMENT RENTALS
Susquehanna Equipment Rentals A mini-practice set illustrating the complete accounting cycle for a service-type business. Includes computation of income taxes expense (as a percentage of income before taxes) and an evaluation of solvency. Can be done as a group assignment. 5 to 6 hours Strong

© The McGraw-Hill Companies, Inc., 2010 CP1-Desc.

5 to 6 hours, Strong

COMPREHENSIVE PROBLEM 1 SUSQUEHANNA EQUIPMENT RENTALS
General Journal December Daily Transactions

a.
2009 Dec 1 Cash Capital Stock Owner invested cash in the business. 1 Rental Equipment Cash Notes Payable Purchased equipment from Rent-it. Note payable is due in one year. 1 Prepaid Rent Cash Paid three months' rent in advance to Shapiro Realty. 4 Office Supplies Accounts Payable Purchased supplies on account; payment due in 30 days. 8 Cash Unearned Rental Fees Received advance payment for equipment rental by McNamer Construction Company. 12 Salaries Expense Cash Paid salaries for first two weeks in December. 15 Cash Accounts Receivable Rental Fees Earned To record rental fees earned in first 15 days of December, 17 Maintenance Expense Accounts Payable To record purchase of repair parts on account from Earth Movers, Inc.; payment due in 10 days. 23 Cash Accounts Receivable Collection of an accounts receivable. 23 (No entry required to record rental of backhoe.) 5,200 5,200 12,000 6,000 18,000 240,000 140,000 100,000

200,000 200,000

12,000 12,000

1,000 1,000

8,000 8,000

600 600

2,000 2,000

© The McGraw-Hill Companies, Inc., 2010 CP1

COMPREHENSIVE PROBLEM 1 SUSQUEHANNA EQUIPMENT RENTALS (continued) a.
General Journal December Daily Transactions 2009 Dec 26 Salaries Expense Cash Paid biweekly payroll. 27 Accounts Payable Cash Paid account payable to Earth Movers, Inc. 28 Dividends Dividends Payable Declared a dividend of 10 cents per share payable on January 15, 2010. 29 (No journal entry required to record lawsuit.) 29 Unexpired Insurance Cash Purchased 12-month liability policy, effective January 1, 2010. 31 Utilities Expense Accounts Payable Utilities for December; payment due in 30 days. 31 Cash Accounts Receivable Rental Fees Earned To record rental fees earned in the second half of December. 9,600 9,600 5,200 5,200 600 600 2,000 2,000

700 700 15,600 4,400 20,000

© The McGraw-Hill Companies, Inc., 2010 CP1(p.2)

COMPREHENSIVE PROBLEM 1 SUSQUEHANNA EQUIPMENT RENTALS (continued) a.
General Journal (Adjusting Entries) 2009 Dec 31 Rent Expense Prepaid Rent To recognize rent expense for December. 31 Interest Expense Interest Payable Interest on note payable to Rent-It ($100,000 x 6% x 1/12). 31 Depreciation Expense Accumulated Depreciation: Rental Equip. Depreciation for December ($240,000 ÷ 8 years x 1/12

4,000 4,000

500 500

2,500 2,500

= $2,500). 31 Office Supplies Expense Office Supplies To record office supplies used during the month. ($1,000 - $600 = $400) 31 Unearned Rental Fees Rental Fees Earned To record portion of advance payment by McNamer Construction Co. earned during December. 31 Accounts Receivable Rental Fees Earned To record fees earned from Mission Landscaping on backhoe rental (6 days x $250 per day). 31 Salaries Expense Salaries Payable To record accrued salaries payable at month-end. 31 Income Taxes Expense Income Taxes Payable To record income taxes for December [($43,200 $11,800 - $600 - $700 - $4,000 - $400 -$2,500 - $500) x x 40%]. 400 400

3,700 3,700

1,500 1,500

1,400 1,400

9,080 9,080

© The McGraw-Hill Companies, Inc., 2010 CP1(p.3)

COMPREHENSIVE PROBLEM 1 SUSQUEHANNA EQUIPMENT RENTALS (continued) a. Date Dec 1 1 1 8 12 15 23 26 27 29 31 Explanation Cash Debit 200,000 Credit 140,000 12,000 8,000 5,200 12,000 2,000 5,200 600 9,600 15,600 Accounts Receivable Debit 6,000 4,400 1,500 Balance 200,000 60,000 48,000 56,000 50,800 62,800 64,800 59,600 59,000 49,400 65,000

Date Dec 15 23 31 31

Explanation...
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