Financial Accounting Notes

Comprehensive Problem (solved)



On Sept.1, 20__ Anthony Ferrara organized a business called “Tony’s Rental” for he purpose of operating an equipment rental yard. The new business was able to begin its operations immediately by purchasing the assets and taking over the location of Rent-All, an equipment rental company that was going out of business.

Tony’s Rental uses the following chart of accounts:

The company closes its accounts and prepares financial statements at the end of each month. During June, the company entered into the following transactions:

Sept. 1            Anthony Ferrara deposited $100,000 cash in a bank account in the name of the business, Tony’s Rental.
Sept. 1            Paid $9,000 to Shapiro Realty as three months advance rent on the rental yard and office formerly occupied by Rent-It.
Sept. 1            Purchased for $180,000 all the equipment formerly owned by Rent-It. Paid $70,000 cash and issued a one-year note payable for $110,000, plus interest at the annual rate of 9%.            
Sept. 4            Purchased office supplies on account from Modern Office Co. as $1,630. Payment due in 30 days.(these supplies are expected to last for several months; debit the Office Supplies asset account)
Sept. 8            Received $10,000 cash from McBryan Construction Co. as advance payment on rental equipment.
Sept. 12         Paid salaried for the first two weeks in September, $3,600.
Sept. 15         Excluding the McBryan advance, equipment rental fees earned during the first 15 days of September amounted to $6,100 of which $5,300 was received in cash.
Sept. 17         Purchased on account from Earth Movers Inc., $340 in parts needed to repair rental tractor. Payment is due in 10 days.

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