SUSQUEHA

as of
Account Titles
Cash
Accounts receivable
Prepaid rent
Unexpired insurance
Office supplies
Rental equipment

Unajusted Trial Balance

Dr.
Cr.
$
65,000
8400
12000
9600
1000
240000

Accumulated Depreciation-rental equipment

Notes payable
Accounts payable

100,000
1700

Interest payable
Salaries payable

2000
8000

Dividends payable
Unearned rental fees
Income taxes payable

200000
-

Capital Stock
Retained earnings

2000

Dividends
Income Summary

38000

Rental fees earned

10400
600
700

Salaries expense
Maintenance expense
Utilities expense
Rent expense
Interest expense
Depreciation expense
Office supplies expense
Income taxes expense

TOTAL
NET INCOME

349,700

$349,700.00

SUSQUEHANNA EQUIPMENT RENTAL

WORKSHEET
as of December 31, 2011
Adjustments
Adjusted Trial Balance
Dr.
Cr.
Dr.
Cr.
$
65,000
$
1,500
9,900
$
4,000
8,000
9600
400
600
240000
2500
$
2,500
100,000
1700
500
500
1400
1400
2000
3700
4300
9080
9080
200000

Income Statement
Dr.

2000
5200

43200

1400

4000
500
2500
400
9080
23,080 $

23,080

11800
600
700
4000
500
2500
400
9080
364,680 $

364,680 $
$

11,800
600
700
4000
500
2500
400
9080
29,580
13,620
43,200

Income Statement
Cr.
$

BalanceSheet
Dr.
Cr.
65,000
9,900
8,000
9600
600
240000
$
2,500
100,000
1700
500
1400
2000
4300
9080
200000
2000

43,200

43,200 $

43,200 $

335,100 $
335,100

321,480
13,620
335,100

GENERAL JOURNAL
Account Titles and Explanation

Date
December

1 Cash
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.
4 Office Supplies
Accounts Payable
Purchased supplies on account
8 Cash
Unearned Rental Fees
Received Advance payment for equipment rental
12 Salaries Expense
Cash
Paid salaries for the first two weeks
15 Accounts Receivables
Cash
Rental Fees
To record the rental fees earned
17 Maintenance Expense
Accounts Payable
Purchased of repair part.
23 Cash
Accounts Receivables
Collections of cash from the customer
26 No journal entry for rental of backhoe
26 Salaries Expense
Cash

Paid salary to employees

27 Accounts Payable
Cash
Paid account payable to Earth Movers Inc.
28 Dividends
Dividends Payable
Declared a dividends
29 No journal entry
29 Unexpired Insurance
Cash
31 Utilities Expense
Accounts Payable
Billed from Universal Utilities on account
31 Cash
Accounts Receivables
Rental Fees

Date
December

GENERAL JOURNAL
ADJUSTING ENTRIES
Account Titles and Explanation
31 (1) Rent Expense
Prepaid Rent
31 (2) Interest Expense
Interest Payable
31 (3) Depreciation Expense - Rental equipment
Accumulated Depreciation - Rental equipment
31 (4) Office Supplies Expense
Office Supplies
31 (5) Unearned Rental Fees
Rental Fees
31 (6) Account Receivable
Rental Fees

31 (7) Salaries Expense

Salaries Payable
31 (8) Income Taxes Expense
Income Taxes Payable

Date
December

GENERAL JOURNAL
POST CLOSING ENTRIES
Account Titles and Explanation
31 Rental Fees Earned
Income Summary
31 Income Summary
Salaries Expense
Maintenance Expense
Utilities Expense
Rent Expense
Office Suplies Expense
Depreciation Expense
Interest Expense
Income Taxes Expense
31 Income Summary
Capital Stock
31 Capital Stock
Dividends

Debit
200000

GENERAL LEDGER
CASH

Credit
200000

Date
December

240000
140000
100000

12000
12000

1000
1000

Date
December

Explanations
1
1
1
8
12
15
23
26
27
29
31
UNEXPIRED INSURANCE
Explanations
29

8000
8000

OFFICE SUPPLIES
Date
December

5200

Explanations
4
31

Adj. Entry

5200

6000
12000

Date
December

RENTAL EQUIPMENT
Explanations
1

18000
Date
December

600

ACCUMULATED DEPRECIATION
Explanations
31
Adj. Entry

600
NOTES PAYABLE
2000
2000

Date
December

5200

Date
December

5200

Explanations
1

ACCOUNTS PAYABLE
Explanations
4

17
27
31

600
600

2000
2000

Date
December

INTEREST PAYABLE
Explanations
31
Adj. Entry

Date
December

SALARIES PAYABLE
Explanations
31
adj. entry

9600
9600
700
700

15600
4400
20000
Date
December

Debit
4000

INCOME SUMMARY
Explanations
31
closing entry
31
closing entry
31
closing entry

Credit
4000

500
500
2500
2500
Date
December

400
400

MAINTENANCE EXPENSE
Explanations
17
31

closing entry

3700
3700
RENT EXPENSE
1500
1500

Date
December

Explanations
31
Adj. Entry

31

closing entry

1400
1400
9080
9080

Debit
43200

Date
December

DEPRECIATION EXPENSE
Explanations
31
Adj. Entry
31
closing entry

Date
December

INCOME TAXES EXPENSE

Explanations
31
adj. entry
31
closing entry

Credit
43200

29580
11800
600
700
4000
400
2500
500
9080
13620
13620
2000
2000

GENERAL LEDGER
CASH
Debit
200000

Credit
140000
12000

8000
5200
12000
2000
5200
600
9600
15600

EXPIRED INSURANCE
Debit
9600

Credit

Balance
200000
60000
48000
56000
50800
62800
64800
59600
59000
49400
65000

Date
December

Date
December

Credit
400

RENTAL EQUIPMENT
Debit
240000

MULATED DEPRECIATION
Debit

NOTES PAYABLE
Debit

ACCOUNTS PAYABLE
Debit

15
23
31
31

adj. entry

PREPAID RENT
Explanations
1
31

Adj. Entry

Balance
9600
Date
December

OFFICE SUPPLIES
Debit
1000

ACCOUNTS RECEIVAB
Explanations

28

Balance
1000
600
Date
December

Credit

Balance
240000

Credit
2500

Balance
2500

Credit
100000

Balance
100000

Date
December

Date
December
Credit
1000

DIVIDENDS PAYAB
Explanations

Balance
1000

UNEARNED RENTAL F
Explanations
8
31

adj. entry

INCOME TAXES PAYA

Explanations
31
adj. entry

CAPITAL STOCK
Explanations
1
31
31

closing entry
closing entry

600
600
700

INTEREST PAYABLE
Debit

INCOME SUMMARY
Debit

Credit

Credit
1400

Credit
43200

29580
13620

Balance
500

Balance
1400

Balance
43200
13620
0

Date
December

Date
December

Date
December

INTENANCE EXPENSE
Debit
600

Credit
600

RENT EXPENSE
Debit
4000

RETAINED EARNING
Explanations

Date
December
500

SALARIES PAYABLE
Debit

1600
1000
1700

Credit

Balance
600
0

Balance
4000

Date
December

DIVIDENDS
Explanations
28
31 closing entry

RENTAL FEES EARN

Explanations
15
31
31
31
31

adj. entry
adj. entry
closing entry

SALARIES EXPENS
Explanations
12
26
31
31

adj. entry
closing entry

UTILITIES EXPENS
Explanations
31
31

closing entry

PRECIATION EXPENSE
Debit
2500

OME TAXES EXPENSE

Debit
9080

4000

Credit
2500

Credit
9080

Balance
2500
0

Balance
9080
0

Date
December

OFFICE SUPPLIES EXP

Explanations
31
Adj. Entry
31
closing entry

Date
December

INTEREST EXPENS
Explanations
31
Adj. Entry
31
closing entry

ACCOUNTS RECEIVABLES
xplanations
Debit
6000

adj. entry

4400
1500

PREPAID RENT
xplanations
Debit
12000
Adj. Entry

DIVIDENDS PAYABLE
xplanations
Debit

UNEARNED RENTAL FEES

xplanations
Debit
adj. entry

3700

INCOME TAXES PAYABLE

xplanations
Debit
adj. entry

CAPITAL STOCK
xplanations
Debit
closing entry
closing entry

2000

Credit

Balance
6000
2000
4000
8400
9900

Credit

Balance
12000
4000
8000

Credit
Balance
2000
2000

Credit
Balance
8000
8000
4300

Credit
Balance
9080
9080

Credit
Balance
200000 200000
13620
213620
211620

RETAINED EARNINGS
xplanations
Debit

Credit

DIVIDENDS
xplanations

Credit

Debit
2000

losing entry

RENTAL FEES EARNED

xplanations
Debit

adj. entry
adj. entry
closing entry

43200

SALARIES EXPENSE
xplanations
Debit
5200
5200
adj. entry
1400
closing entry

UTILITIES EXPENSE
xplanations
Debit
700
closing entry

Balance

Balance
2000
2000
0

Credit
Balance
18000
18000
20000
38000
3700
41700
1500
43200
0

Credit

Balance
5200
10400
11800
11800
0

Credit

Balance
700
700
0

OFFICE SUPPLIES EXPENSE

xplanations
Debit
Adj. Entry
400
closing entry

INTEREST EXPENSE
xplanations
Debit
Adj. Entry
500
closing entry

Credit

Balance
400
400
0

Credit

Balance
500
500
0

SUSQUEHANNA EQUIPMENT RENTALS

INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2011
REVENUE:
Rental fees earned

EXPENSES:
Salaries expense
Maintenance expense
Utilities expense
Rent expense
Office supplies expense
Depreciation expense
Interest expense
Profit before income taxes expense
Income taxes expense @ 40%

NET INCOME

SUSQUEHANNA EQUIPMENT RENTALS

Statement of Changes in Equity
For the Year Ended December 31, 2009
Retained earnings, December 1, 2009
Add: Net Income
Subtotal
Less: Dividends
Retained earnings, December 31, 2009

Notes to the financial statements:

Note 1Depreciation policies

Depreciation expense in the financial statements is computed by the straight-line method. The estimated useful lif
equipment is 8 years.

Note 2Maturity dates of liabilities

The Companys notes payable consist of a single obligation which matures on November 30, 2010. The maturity v
including interest, will amount to $106,000.

Note 3Pending litigation

The Company has been named as a co-defendant in a $25,000 personal injury lawsuit. The extent of legal and fina
any, cannot be determined at this time.

ALS

SUSQUEHANNA EQUIPMENT REN

Balance Sheet
December 31, 2009

1, 2011

Assets

$
$

11,800
600
700
4000
400
2500
500

43,200

Cash
Accounts Receivable
Prepaid rent
Unexpired insurance
Office supplies
Rental equipment
Less: Accumulated depreciation
Total assets

$
$

20500
22,700
9080
31,780

Liabilities & Equity

Liabilities:
Notes payable
Accounts payable
Interest payable

ALS
y
2009

Salaries payable
Dividends payable
Unearned rental fees
$0
13,620
13,620
2,000
$

Income taxes payable

Total liabilities
Shareholders' equity:
Share capital

11,620

ethod. The estimated useful life of the rental

mber 30, 2010. The maturity value of this note,

uit. The extent of legal and financial responsibility, if

Retained earnings
Total liabilities and shareholders' equity

f.

It does not appear that the company faces any imme

start with $200,000 cash, but in its first transaction
equipment, leaving only $60,000 cash to begin opera
increased to $65,000 by the end of December. Thus,
operations, the business was able to generate $5,000
operations.

The $100,000 note payable due on November 30, 20

concern about the company's solvency, however. Cu
have sufficient liquid assets to satisfy this obligation
working capital position is actually negative by $25,
minus $118,980 of current liabilities). Likewise, its
($93,100 of current assets divided by $118,980 of cu
business can continue to generate at least $5,000 of
each month, remaining solvent should not pose a ser

minus $118,980 of current liabilities). Likewise, its

($93,100 of current assets divided by $118,980 of cu
business can continue to generate at least $5,000 of
each month, remaining solvent should not pose a ser
g.

There is nothing at all unethical about Patty Driver

maintaining the accounting records for Susquehann
businesses, the accounting records are maintained e
none of whom are independent of the organizatio

The concept of independence refers to auditing fina

auditor has to make an independent evaluation of th
Independence does not apply to the routine mainten

NNA EQUIPMENT RENTALS

Balance Sheet
cember 31, 2009

iation

240,000
2,500

65,000
9,900
8,000
9,600
600
237,500

330,600

100,000

1,700
500
1,400
2,000
4,300
9,080
$

118,980

200,000
11,620

211,620

company faces any immediate solvency problems. It did

ut in its first transaction the company spent $140,000 on
0,000 cash to begin operations. This amount had
end of December. Thus, during its first month of
s able to generate $5,000 of positive cash flow from

due on November 30, 2010, does raise a potential

y's solvency, however. Currently, the business does not
to satisfy this obligation. In fact, the company's
actually negative by $25,880 ($93,100 of current assets
iabilities). Likewise, its current ratio is only 0.78:1
ivided by $118,980 of current liabilities). However, if the
nerate at least $5,000 of positive operating cash flows
vent should not pose a serious issue.

hical about Patty Driver (a founding shareholder)

records for Susquehanna Equipment Rentals. In most
records are maintained either by owners or employees,
ndent of the organization.

ce refers to auditing financial statements, where the

ependent evaluation of the statements fairness.
ly to the routine maintenance of accounting records.