Account Receivable 04
Eliud’s Leasing Inc. uses the following chart of accounts:
Account Receivable 04
Prepaid Rent 06
Unexpired Insurance 07
Office Supplies 08
Rental Equipment 10
Rental Equipment 12
Notes Payable 20
Account Payable 22
Interest Payable 26
Unearned Rental Fees 29
Eliud Torres, Capital 30
Eliud Torres, Drawing 35
Income Summary 40
Rental Fees Earned 50
Salaries Expense 60
Maintenance Expense 61
Utilities Expense 62
Rent Expense 63
Office Supplies Expense 64
Depreciation Expense: Rental
Interest Expense 66
Dec. 1 Eliud deposited $110,000 cash in a bank account in the name of the business, Eliud’s Leasing Inc.
Dec. 1 Paid 9,000 to Hernandez Realty as three months advance rent on the rental yard and office formerly occupied by Rent-it.
Dec. 1 Purchased office supplies on account from Sterling Office co. 1,900. Payment due in 30 days
Dec. 6 Purchased for 160,000 all equipment formerly owned by Rent-it. Paid 60,000 cash and issued a one year note payable for 10,000, plus interest at the annual rate of 9%.
Dec. 8 Received 12, 000 cash from Lewis construction Co. as advance payment on rental equipment.
Dec. 12 paid salaries for the first two weeks in December, $5,500
Dec. 15 Excluding the Lewis advance, equipment rental fees earned during the first 15 days of December amounted $6,000, of which $4,500 was received in cash.
Dec. 17 Purchased on account from Rutland Movers, Inc, $500 in parts needed to repair a rental tractor. Payment is due in 10 days.
Dec. 21 Eliud’s Leasing Inc. (Eliud Torres was named, along with Jagne Landscaping and Collier Construction, as a co-defendant in a $ 25,000 lawsuit filed on behalf of Kevin Davenport. Jagne Landscape had left the rented backhoe in a fenced construction site owned by collier construction. After working hours on December 20, 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 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. 22 Purchased a 12 month public-liability insurance policy for $2,900. 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, and affords no coverage for the injuries sustained by Kevin Davenport on
Dec. 23 Collected $400 of the accounts receivable recorded on December 15
Dec. 25 Rented a backhoe to Jagne Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Jagne Landscaping expects to keep the backhoe for about two or three weeks.
Dec. 26 paid biweekly salaries, $5,500.
Dec. 27 Paid account payable to Rutland Movers, Inc., $500.
Dec. 28 Eliud Torres withdrew $2,500 cash from the business to pay the rent on his personal residence.
Dec. 29 Received a bill from Universal Utilities for the months of December, $170. Payment is due in 30 days.
Dec. 31 Equipment rental fees earned during second half of December and received in cash amounted to $8,400.
Data for Adjusting Entries
A. The advance payment of Hernandez for rent on December 1 covered a period of three months.
B. Interest accrued on the note payable to Rent-it amounted to $750 at December 31.
C. The rental equipment is being depreciated by the straight-line method over a period of 10 years.
D. Office supplies on hand at December 31 are estimated at $900. E During December, the company earned $4,500 of the rental fees paid in advance by Lewis Construction Co. on December 8.
F. As of December, Eliud’s Leasing Inc. has earned five days rent on the backhoe rent to Jagne Landscaping on Dec 25.
G. Salaries earned by employees since the last payroll date (December 26) amounted to $2,000 at month-end.
1. Journalize the transactions
2. Post to T Accounts.
3. Journalize adjusting entries and post to ledger accounts
4. Prepare financial statement (Income statement, statement of owners equity and a balance sheet in report form as of December 31)
5. Prepare required disclosures to accompany the December 31, Financial Statements of Eliud’s Leasing Inc. 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.
6. Prepare closing entries and post to ledger accounts
7. Prepare an after closing Trial Balance as of December 31.