Achill Island Equipment Rentals, INC.
A COMPREHENSIVE ACCOUNTING
On December 1, 2011, Mike and Bridgette O’Malley formed a corporation called Achill Island 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:
Unearned Rental Fees
Income Taxes Payable
Rental Fees Earned
Office Supplies Expense
Income Taxes Expense
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 Mike and Bridgette O’Malley 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 formally 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, 2012.
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.)
Dec. 8 Received $8,000 cash as advance payment on equipment rental from McNamer Construction Company.
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 Mover, Inc., $600 in parts needed to repair a rental tractor. 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, 2012.
Dec. 29 Achill Island Equipment Rentals was named, along with Mission Landscaping and Collier Construction as a co-defendant in a $25,000 lawsuit filed. Mission Landscaping had left the rented backhoe in a fenced construction site owned by Collier construction. After working hours on December 26, kids had climbed the fence to play on parked construction equipment. While playing on the backhoe, one 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.
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, 2012, and affords no coverage for the injuries sustained by the kids on December 26.
Dec. 31 Received a bill from Universal Utilities for the month of December for $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 2012.
a. Perform the following steps of the accounting cycle for the month of December:
b.Prepare an Income Statement and Statement of Retained Earnings for the year ended December 31, and a Balance Sheet (in professional report format) as of December 31.
c.Prepare required disclosures to accompany the December 31 financial statements. Your solution should include a separate note addressing each of the following areas: (1) depreciation policy, (2) maturity dates of major liabilities, and (3) potential liability due to pending litigation.
d.Prepare closing entries and post to ledger accounts.
e.Prepare an After Closing Trial Balance as of December 31.
f.During December, this company’s cash balance has fallen from $200,000 to $65,000. Does it appear headed for insolvency in the near future? Explain your reasoning.
g.Would it be ethical for Bridgette O’Malley to maintain the accounting records for this company, or must they be maintained by someone who is independent of the organization?
We always make sure that writers follow all your instructions precisely. You can choose your academic level or professional level, and we will assign a writer who has a respective degree.
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document.
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension.A 100% refund is guaranteed.
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text.
Tutorpro support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Tutorpro Homework Help Services
At Tutorpro, we have top rated masters and PhD writers who will help you tacke that homework and score A+ grade. Tutorpro services covers all levels of education : high school, college, university undergraduate, masters and PhD academic level.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Tutorpro academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. This is free because we want you to be completely satisfied with the service offered.