Fred’s Fun-Time Arcade Rentals-Accounting Cycle On December 1,2018, Fred and Patsy Forrest formed a corporation called Fred’sFun-Time Arcade Rentals. The newly formed corporation rents retrovideo arcade games, pinball machines, dunk tanks, photo booths,moon bounces and more for businesses, community centers, schools,group events, and parties. Fred’s Fun-Time Arcade Rentalsimmediately began operations by taking over the location of ArcadeAlley Games, a vintage classic arcade game rental company thatclosed. Fred’s Fun-Time Arcade Rentals, uses the followingaccounts: Cash                                                  Income Taxes Payable AccountsReceivable                         Capital Stock PrepaidRent                                                  Retained Earnings UnexpiredInsurance                                     Dividends OfficeSupplies                                              Income Summary Arcade GameMachines                                Rental Fees Revenue AccumulatedDepreciation:                      Salaries Expense Arcade GameMachines                         Maintenance Expense Notes Payable                                Utilities Expense Accounts Payable                                         Rent Expense Interest Payable                                         Office Supplies Expense Salaries Payable                                         Depreciation Expense: Arcade Game Machines DividendsPayable                                         Interest Expense Unearned RentalFees                               Income TaxesExpense                                            The corporation performs adjusting entries monthly. Closing entriesare performed annually on December 31. During December, thecorporation entered into the following transactions: Dec.1   Issued to Fred and Patsy Forrest 30,000 shares ofcapital stock in exchange for a total of $300,000 cash. Dec.1   Purchased for $240,000 all of the arcade gamemachines formerly owned by Arcade Alley Games. Paid $90,000 cashand issued a one-year note payable for $150,000. The note, plus all12-months of accrued interest, are due November 30, 2019. Dec.1   Paid $15,000 to Sunshine Realty as three months’advance rent for warehouse used to store the arcade game machinesand office formerly occupied by Arcade Alley Games. Dec. 4Purchased office supplies on account from Office Depot, $1,300.Payment is due in 30 days. (These supplies are expected to last forseveral months; debit the Office Supplies asset account.) Dec. 8Received $6,000 cash as advance payment on pinball arcade gamerentals from Party Planners, Inc. (Credit Unearned Rental Fees.)Dec. 12 Paid salaries for the first two weeks in December, $5,400.Dec. 15 Excluding the advance from Party Planners, Inc., arcadegame rental fees earned during the first 15 days of Decemberamounted to $22,000, of which $14,000 was received in cash. Dec. 17Purchased on account from Arcade Restoration, Inc., $400 in partsneeded to repair a dunk tank machine. (Debit an expense account.)Payment is due in 10 days. Dec. 23 Collected $2,100 of the accountsreceivable recorded on December 15. Dec. 26 Rented a video pokermachine to O’Malley’s Pub at a price of $150 per day, to be paidwhen the video poker machine is returned. O’Malley’s Pub expects tokeep the video poker machine for a month. Dec. 26 Paid biweeklysalaries, $5,400. Dec. 27 Paid the account payable to ArcadeRestoration, Inc., $400. Dec. 28 Declared a dividend of 10 centsper share, payable on January 15, 2019. Dec. 29 Purchased a12-month insurance policy for $6,000. The policy goes into effecton January 1, 2018. Dec. 31 Received a bill from VerizonCommunications for phone service for the month of December, $700.Payment is due in 30 days. Dec. 31 Arcade game rental fees earnedduring the second half of December amounted to $25,000, of which$19,000 was received in cash. Data for Adjusting Entries a. Theadvance payment of rent on December 1 covered a period of threemonths. b. The annual interest rate on the note payable to ArcadeAlley Games is 6 percent. c. The arcade game machines are beingdepreciated by the straight-line method over a period of eightyears. d. Office supplies on hand at December 31 are estimated at$700. e. During December, the company earned $3,700 of the rentalfees paid in advance from Party Planners, Inc. on December 8. f. Asof December 31, six days’ rent on the pinball machines rented toO’Malley’s Pub on December 26 has been earned. g. Salaries earnedby employees since the last payroll date (December 26) amounted to$1,600 as of month-end. h. It is estimated that the company issubject to a combined federal and state income tax rate of 30percent of income before income taxes (total revenue minus allexpenses other than income taxes). These taxes will be paid in2019. Instructions Perform the following steps of the accountingcycle for the month of December:1.    Journalize the December transactions. Donot record adjusting entries at this point.2.    Post the December transactions to theappropriate ledger accounts. 3.    Prepare theunadjusted trial balance. 4.    Prepare thenecessary adjusting entries for December.5.    Post the December adjusting entries tothe appropriate ledger accounts. 6.    Preparean income statement and statement of retained earnings for the yearended December 31, and a balance sheet (in report form) as ofDecember 31 7.    Prepare closing entries andpost to ledger accounts. 8.    Prepare anafter-closing trial balance as of December 31.