gregorygarver.com

[Wizzerd]

JACKSON EQUIPMENT RENTAL COMPANY On August 1, 2006, Jackson Equipment Rental Company was formed by Sam and John Jackson. Jackson’ Chart of Accounts appears below:CashIncome Taxes PayableAccounts ReceivableIncome Tax ExpensePrepaid Rent Unexpired InsuranceSam Jackson, CapitalOffice Supplies InventoryIncome SummaryRental Equipment InventoryEarned Rental Fees Accumulated Depreciation:Salaries Expense Rental EquipmentMaintenance ExpenseNotes PayableUtilities ExpenseAccounts PayableRent ExpenseInterest PayableOffice Supplies ExpenseSalaries PayableDepreciation ExpenseSam Jackson, DrawingInterest ExpenseUnearned Rental Fees Jackson closes its accounts and prepares financial statements monthly. The following were the company’s August transactions: 1.8/1Sam Jackson contributed $100,000 cash to start the business.2.8/1Purchased all of the rental equipment of a recently closed equipment rentalequipment company for $180,000. Paid $70,000 cash and signed a one-year note payable to the owner, Ralph Bass, for $110,000. 3. 8/1Paid 3 months rent in advance of $9,000 for the building and yard to Sharks Realty.4. 8/4Purchased $2,000 office supplies on account from Sayes Office Supply. Paymentis due in 30 days. These supplies are expected to last 4 months.5.8/8McCumber Company paid $20,000 cash as an advance payment on rental equipment.6. 8/12 Paid Salaries for the first two weeks of August: $4,100.7.8/15Earned equipment rental fees for the first 15 days of August of $9,000. A totalof $8,000 of this amount was received in cash. This does not include theMcCumber account.8.8/17Purchased $500 of payloader repair parts from Davis Tractor Company. Parts were needed to repair a payloader. Payment is due in 10 days. 9. 8/23Received a payment of $300 on the amount due from August 15.10.8/26Rented a backhoe to Jacobs Plumbing company at $100 per day. Paymentis due when the backhoe is returned in 2 weeks.11.8/26Paid bi-weekly salaries of $4,100.12.8/27Paid the amount owed to Davis Tractor Company.13. 8/28 Sam Jackson withdrew $4,000 for his personal use.JACKSON EQUIPMENT RENTAL COMPANY14.8/29Jacobs Plumbing left the rented backhoe inside a locked fence at a construction site of the prime contractor Ellis Construction. A 12 year old boy climbed thefence and broke his leg playing on the backhoe. Jackson, Jacobs and Ellis have been sued for by the parents for $50,000. The extent of Jackson’s liabilitycannot be reasonably determined.15.8/29Jackson purchased a one year liability insurance policy for $2,700. The policy period begins September 1.16.8/30Received a $600 utility bill for August. Payment due in 30 days.17.8/30Equipment rental fees earned the last half of the month totaled $10,000. Received cash payments for the total.The following is information needed to prepare the company’s adjusting entries at the end of August:1.The advance rent payment on August 1 was for three months. 2.There was $800 of accrued interest in August on the note payable.3.Rental equipment is depreciated over 10 years on a straight-line basis.4.Office supplies on hand at August 31 total $1,100.5.During August, Jackson earned $12,000 of the rental fees McCumber paid in advance on September 8.6.At August 31, Jackson earned 5 days of rent on the backhoe rented to Jacobs Plumbing.7.Salaries earned but not paid since the last payroll date amount to $1,000.8.Jackson’s estimated tax rate is 40% of its income before income taxes. Taxes will be paid September 15.Instructions:a.Journalize the above transactions.b.Post the transactions to ledger (T) accounts.c.Prepare a 10 column worksheet for the month ended August 31.d.Prepare the Adjusting entries on needed on August 31 and post them to T-Accounts and Spreadsheet.e.Prepare the August Income Statement, Statement of Owner’s Equity, andBalance Sheet.f.Prepare closing entries for August.

[aynalemtiku]

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