Com Prob 1 Essay example

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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

Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

5 to 6 hours, Strong

COMPREHENSIVE PROBLEM 1
SUSQUEHANNA EQUIPMENT RENTALS

a.
General Journal
December Daily Transactions
2015
Dec
1 Cash

200,000

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.

200,000
240,000
140,000
100,000

12,000
12,000

4 Office Supplies
Accounts Payable
Purchased supplies on account; payment due in
30 days.

1,000

8 Cash

8,000

1,000

Unearned Rental Fees
Received advance payment for equipment rental by McNamer Construction Company.

8,000

12 Salaries Expense
Cash
Paid salaries for first two weeks in December.

5,200

15 Cash
Accounts Receivable
Rental Fees Earned
To record rental fees earned in first 15 days of
December,

12,000
6,000

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.

5,200

18,000

600
600

2,000
2,000

26 (No entry required to record rental of backhoe.)

Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

COMPREHENSIVE PROBLEM 1
SUSQUEHANNA EQUIPMENT RENTALS
(continued)
a.
General Journal
December Daily Transactions
2015
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, 2016.

5,200
5,200
600
600
2,000
2,000

29 (No journal entry required to record lawsuit.)
29 Unexpired Insurance
Cash
Purchased 12-month liability policy, effective
January 1, 2016.

9,600
9,600

31 Utilities Expense
Accounts Payable
Utilities for December; payment due in 30 days.

700

31 Cash
Accounts Receivable
Rental Fees Earned
To record rental fees earned in the second half of December.

15,600
4,400

700

20,000

Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.

COMPREHENSIVE PROBLEM 1
SUSQUEHANNA EQUIPMENT RENTALS
(continued)
a.
General Journal
(Adjusting Entries)
2015
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
= $2,500).
31 Office Supplies Expense
Office Supplies
To record office supplies used during the month.
($1,000 - $600 = $400)

4,000
4,000
500
500

2,500
2,500

400
400

31 Unearned Rental Fees
Rental Fees Earned
To record portion of advance payment by McNamer
Construction Co. earned during December.

3,700

31 Accounts Receivable
Rental Fees Earned
To record fees earned from Mission Landscaping on backhoe rental (6 days x $250 per day).

1,500

31 Salaries Expense
Salaries Payable
To record accrued salaries payable at month-end.

1,400

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%].

9,080

3,700

1,500

1,400

9,080

Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
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