Comprehensive Problema Tony's Rentals A Comprehensive Accounting Cycle Problem On September 1, 20, Anthony Ferrara organized a business called Tony's Rentals for the pur- pose of operating an equipment rental yard. The new business was able to begin operations im- ‘mediately by purchasing the assets and taking over the location of Rent-It, an equipnient rental ‘company that was going out of business. ‘Tony's Rentals uses the following chart of accounts: : Cash 1 Anthony Ferrara, Capital. . feet] ‘Accounts Recoivable ..... 4 Anthony Ferrara, Drawing 35 Prepaid Rent 6 Income Summary 40 Unexpired Insurance... . s+ 7 Rental Fees Earned 50 tice Supplies Lecssssses B. Salaries Expense Hee Rental Equipment... + 10. Maintenance Expense . a ‘Accumulated Depreciation sities Expense e ental Equipment... wlocs 12 Rent Expense 6 "Notes Payable 20. Ofice Supplies Expense 64 ‘Accounts Payal... sess 22 Depreciation Expense: Rental Interest Payable... 5... +. 25 Equipment. : i paces, Salaries Payable 26 Inerest Expense eee eee 8B Unearned Rental Foes... .+esev. 29 “The company closes its accounts and prepares financial statements at the end of each month. During September, the company entered into the following transactions: Sept. 1 Anthony Ferrara deposited $100,000 cash in a bank account in the name of the busi- ness, Tony's Rentals 3 Sept. 1 Paid $9,000 to Shapiro Realty as three months" advance rent on the rental yard and office formerly occupied by Rent, Sept. 1 Purchased for $180,000 all the equipment formerly owned by Rent-t. Paid’$70,000 cash and issued a one-year note payable for $110,000, plus interes at the annual rate of 9%, : Sept. 4 Purchased office supplies on account from Modem Office Co., $1,630. Payment due in 30 days. (These supplies are expected to last for several months; debit the O'fice Supplies asset account) ved $10,000 cash from MeBryan Construction Co. as advance payment on rental Sept. 8 “Sept. 12 Paid salaries for the first two weeks in September, $3,600. Sept. 15 _ Excluding the MeBryan advance, equipment rental fees earned during the firs 15 days of September amounted to $6,100, of which $5,300 was received in cash. Sept. 17 Porchased on account from Earth Movers, Ine, $340 in parts needed to repair a renal tractor. Payment is due in 10 days Sept. 23. Collected $210 of the accounts receivable recorded on September 15. Sept. 25 Rented a backhoe to Mission Landscaping ata price of $100 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks. Sept. 26 Paid biweekly salaries, $3,600. Sept. 27 Paid the account payable to Earth Movers, Inc., $340.Comprehensive Problem 1 | 1 : } ‘Sept. 28 Anthony Ferrara withdrew $2,000 cash from the business to pay the rent on his per- sonal residence. ‘Sept. 29. Tony's Rentals (Anthony Ferrara) was named, along with Mission Landscaping and | Collier Construction, as a co-defendant in a $25,000 lawsuit filed on behalf of Kevin Davenport. Mission Landscape had left the rented backhoe in a fenced construction | site owned by Collier Construction, Afier working hours on 26, Davenport, had climbed the fence to play on parked con miton ‘equipment. White playing on ‘the backhoe, he fell and broke his arm. The extént of legal and financial respons + ity for this accident, if any, cannot be determined at this time. (Nate: This event does. ‘ot require a journal sm this time, but lisclosure in notes accompa | sept 29. Purchaied | {ects the company against liability for injuries and property | ‘equipment, However, the policy goes into effect on October |, and affords no cover- i ‘age for the injuries sustained by Kevin Davenport on Seplember 26. | Sept. 30 Received a bill from Universal Utilities for the month of September, $270. Payment is due in 30 days. ap: pha a ee tomo lt enter eed age + amounted to $8,450. “Data for Adjusting Entries eee bi Hoou 2 The sdvance payment of eat on Seplember 1 covered period of thee months | bs, Interest accrued on the note payable to Rent-It amolinted 10 $825 at September 30. | «Te rental equipment is being depreciated bythe straight-line method over a period of 10 year. 4, Office supplies on hand at Sepiember 30 are estimated st $1,100. During September, the company earned $4,840 of the rental fees paid in advance by MeBryan tion Co, on September 8, {As of September 30, Tony's Rentals has carned five days" rent on the backhoe rented to Mis; sion Landseaping on September 25 &, Salaries earned by employers since the lst payroll date (September 26) amounted to $900 at ‘month-end Instrutio ‘ ‘&, Journalize the above transactions. * { hh Post to ledger accounts. eee ‘ Prepare a 10-column worksheet for the month ended September 30, 20. 4, Prepare an income statement and a statement of owner's equity for the month of September, 7 And a balance sheet (in report form) as of September 30. : Prepare required disclosures 40 accompany the September 30 financial of Tony's "Rentals, Your solution should include a separate note addressing wach of the following areas: (0) de policy, (2) maturity dates of major liabilities, and (3) potential liability due to pending litigation. Prepare adjusting and closing entries and post to ledger accounts. 1B Prepare an after-closing trial balance as of September 30.