Create Journal Entries For Cash Capital Stock

Create Journal Entries For The Followingcashcapital Stockaccounts Rece

Create Journal Entries For The Followingcashcapital Stockaccounts Rece

Create Journal Entries for the following Cash Capital stock Accounts receivable Retained earnings Prepaid rent Dividends Unexpired insurance Income summary Office supplies Rental fees earned Rental equipment Salaries expense Accumulated depreciation: Rental equipment Maintenance expense Notes payable Utilities expense Accounts payable Rent expense Interest payable Office supplies expense On December 1, 2015, 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: Salaries payable Depreciation expense Dividation expense Unearned rental fees Income taxes expense Income taxes payable 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 20,000 shares of capital stock in exchange for a total of $200,000 cash. Dec. 1 Purchased for $240,000 all of the equipment formerly owned by Rent-It. Paid $140,000 cash and issued a one-year note payable for $100,000. The note, plus all 12-months of accrued interest, are due November 30, 2016. Dec. 1 Paid $12,000 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., $1,000. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.) Dec. 8 Received $8,000 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, $5,200. Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $18,000, of which $12,000 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 $2,000 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, $5,200. 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, 2016. Dec. 29 Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co-defendant in a $25,000 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 $9,600. 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, 2016, 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, $700. Payment is due in 30 days. Dec. 31 Equipment rental fees earned during the second half of December amounted to $20,000, of which $15,600 was received in cash. Data for Adjusting Entries 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. d. Office supplies on hand at December 31 are estimated at $600. e. During December, the company earned $3,700 of the rental fees paid in advance by McNamer Construction Company on December 8. f. 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 $1,400 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 2016. rev: 08_14_2014_QC_52446 · Record the issuance of cash. · 2. Record the purchase of equipment formerly owned by Rent-It. · 3. Record the payment of rent in advance for three months. · 4. Record the purchase of office supplies on account. · 5. Record the cash received as advance payment on equipment rental. · 6. Record the salaries paid for the first two weeks. · 7. Record the rental fees earned in first 15 days of December. · 8. Record the purchase of repair parts on account. · 9. Record the collection of an accounts receivable. · 10. Record the rental of backhoe. · 11. Record the payment of biweekly payroll. · 12. Record the payment of account payable to Earth Movers, Inc. · 13. Record the dividend declared. · 14. Record the entry of lawsuit. · 15. Record the purchase of 12-month liability policy. · 16. Record the utilities for December. · 17. Record the rental fees earned in the second half of December. · 1. Record the rent expense for December. · 2. Record the interest on note payable to Rent-It. · 3. Record the depreciation for December. · 4. Record the office supplies used during the month. · 5. Record the portion of advance payment by McNamer Construction Co. · 6. Record the fees earned from Mission Landscaping on backhoe rental. · 7. Record the accrued salaries payable at month-end. · 8. Record the income taxes for December. · 1. Record the entry to close revenue earned to income summary. · 2. Record the entry to close all expense accounts to income summary. · 3. Record the entry to transfer net income earned in 2015 to the retained earnings account. · 4. Record the entry to transfer dividends declared in 2015 to the retained earnings account.

Paper For Above instruction

In managing the financial activities of Susquehanna Equipment Rentals (SER), accurate journal entries are essential to reflect the company's transactions, adjustments, and closing processes correctly. This detailed exercise involves recording a variety of transactions occurring in December 2015, which provides insights into the application of accounting principles such as revenue recognition, expense matching, depreciation, and equity adjustments. Each transaction, from initial share issuance to adjusting and closing entries, is crucial for maintaining proper financial records and ensuring compliance with accounting standards.

Initial Capital and Asset Acquisition

The formation of SER begins with the issuance of common stock to founders John and Patty Driver, who contributed $200,000 in cash in exchange for 20,000 shares. The journal entry would debit cash and credit common stock to reflect this initial investment:

Debit: Cash $200,000
Credit: Common Stock $200,000

Subsequently, the purchase of equipment formerly owned by Rent-It for $240,000 is recorded by debiting the equipment asset account and crediting cash and notes payable to reflect the partial payment and financing arrangement:

Debit: Equipment $240,000
Credit: Cash $140,000
Credit: Notes Payable $100,000

Prepaid Expenses and Supplies

The company paid $12,000 to Shapiro Realty for three months’ advance rent, which is recognized proportionally over the three months. The initial payment increases prepaid rent; monthly rent expense is recognized monthly through adjusting entries.

Debit: Prepaid Rent $12,000
Credit: Cash $12,000

The purchase of office supplies on account is recorded by debiting Office Supplies and crediting Accounts Payable:

Debit: Office Supplies $1,000
Credit: Accounts Payable $1,000

Unearned Revenue and Customer Payments

When SER receives cash in advance from McNamer Construction, it's credited to Unearned Rental Fees, representing a liability until earned.

Debit: Cash $8,000
Credit: Unearned Rental Fees $8,000

Payments received on account, such as collection of $2,000 of receivables, are recorded by debiting Cash and crediting Accounts Receivable:

Debit: Cash $2,000
Credit: Accounts Receivable $2,000

Operational Expenses and Revenue Recognition

Salaries paid for two weeks amount to $5,200, recorded by debiting Salaries Expense and crediting Cash:

Debit: Salaries Expense $5,200
Credit: Cash $5,200

Rental income earned during December, including fees from the first 15 days and second half, is recognized by debiting Cash or Accounts Receivable, and crediting Rental Fees Earned:

Debit: Cash $12,000
Debit: Accounts Receivable $6,000
Credit: Rental Fees Earned $18,000

Similarly, rental fees earned from the backhoe rental are accrued, especially the six days’ rental income earned after the initial rental period, which requires recognizing accrued revenue.

Accounts Payable and Expenses

Payment of the $600 payable to Earth Movers is recorded by debiting Accounts Payable and crediting Cash:

Debit: Accounts Payable $600
Credit: Cash $600

Expenses such as utilities, depreciation, insurance, maintenance, and supplies are recognized through adjusting entries. For example, depreciation expense for equipment and supplies used are recorded as follows:

Debit: Depreciation Expense
Credit: Accumulated Depreciation - Rental Equipment

Insurance policy premiums paid upfront are initially recorded as Prepaid Insurance (asset) and gradually expensed over the policy period.

Adjusting Entries for December 31

Adjustments consider accrued interest on notes payable at 6% annually, accrued salaries of $1,400, supplies on hand ($600), and rental fees earned but not yet received.

The interest expense on the note payable accrues as:

Debit: Interest Expense $>
Credit: Interest Payable $>

Income tax expense is calculated at 40% on income before taxes, and adjusted accordingly for proper period recognition.

Closing Entries

At year-end, revenue accounts are debited and closed to Income Summary, and expense accounts are credited to Income Summary. Net income, calculated after adjusting for taxes, is transferred to Retained Earnings, as are dividends declared.

Debit: Revenue Accounts
Credit: Income Summary

Debit: Income Summary
Credit: Expense Accounts

Debit: Income Summary
Credit: Retained Earnings

Debit: Retained Earnings
Credit: Dividends Payable (or Dividends)

Conclusion

These entries demonstrate the application of accrual accounting principles, ensuring that revenues and expenses are recognized in the period they occur, and that asset and liability accounts are accurately reported. Proper recording of these transactions facilitates reliable financial statements, which are critical for decision-making by stakeholders. Adhering to these procedures also ensures compliance with generally accepted accounting principles (GAAP).

References

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