OnDecember 1, Year 1, John and Patty Driver formed a corporationcalled Susquehanna Equipment Rentals. The new corporation was ableto begin operations immediately by purchasing the assets and takingover the location of Rent-It, an equipment rental company that wasgoing out of business. The newly formed company uses the followingaccounts.

Cash	Capital Stock
Accounts Receivable	Retained Earnings
Prepaid Rent	Dividends
Unexpired Insurance	Income Summary
Office Supplies	Rental Fees Earned
Rental Equipment	Salaries Expense
Accumulated Depreciation:Rental Equipment	Maintenance Expense
Notes Payable	Utilities Expense
Accounts Payable	Rent Expense
Interest Payable	Office SuppliesExpense
Salaries Payable	Depreciation Expense
Dividends Payable	Interest Expense
Unearned Rental Fees	Income Taxes Expense
Income Taxes Payable

Thecorporation performs adjusting entries monthly. Closing entries areperformed annually on December 31. During December, the corporationentered into the following transactions.

Dec.	1		Issued to John and Patty Driver20,000 shares of capital stock in exchange for a total of $240,000cash.
Dec.	1		Purchased for$288,000 all of the equipment formerlyowned by Rent-It. Paid $168,000 cash and issued a 1-year notepayable for $120,000. The note, plus all 12 months of accruedinterest, are due November 30, Year 2.
Dec.	1		Paid $14,400 to Shapiro Realtyas three months’ advance rent on the rental yard and officeformerly occupied by Rent-It.
Dec.	4		Purchased office supplies onaccount from Modern Office Co., $1,200. Payment due in 30 days.(These supplies are expected to last for several months; debit theOffice Supplies asset account.)
Dec.	8		Received $9,600 cash asadvance payment on equipment rental from McNamerConstruction Company. (CreditUnearned Rental Fees.)
Dec.	12		Paid salaries for the first twoweeks in December, $6,240.
Dec.	15		Excluding theMcNamer advance, equipment rentalfees earned during the first 15 days of December amounted to$21,600, of which $14,400 was received in cash.
Dec.	17		Purchased on account from EarthMovers, Inc., $720 in parts needed to repair a rental tractor.(Debit an expense account.) Payment is due in 10 days.
Dec.	23		Collected $2,400 of theaccounts receivable recorded on December 15.
Dec.	26		Rented a backhoe to MissionLandscaping at a price of $300 per day, to be paid when the backhoeis returned. Mission Landscaping expects to keep the backhoe forabout two or three weeks.
Dec.	26		Paid biweekly salaries,$6,240.
Dec.	27		Paid the account payable toEarth Movers, Inc., $720.
Dec.	28		Declared a dividend of 12 centsper share, payable on January 15, Year 2.
Dec.	29		Susquehanna EquipmentRentals was named, along with Mission Landscaping and CollierConstruction, as a co-defendant in a $30,000 lawsuit filed onbehalf of Kevin Davenport. Mission Landscaping had left the rentedbackhoe in a fenced construction site owned by CollierConstruction. After working hours on December 26, Davenport hadclimbed the fence to play on parked construction equipment. Whileplaying on the backhoe, he fell and broke his arm. The extent ofthe company’s legal and financial responsibility for this accident,if any, cannot be determined at this time. (Note:Thisevent does not require a journal entry at this time, butmayrequire disclosure in notes accompanying thestatements.)
Dec.	29		Purchased a 12-month publicliability insurance policy for $11,520. This policy protects thecompany against liability for injuries and property damage causedby its equipment. However, the policy goes into effect on January1, Year 2, and affords no coverage for the injuries sustained byKevin Davenport on December 26.
Dec.	31		Received a bill from UniversalUtilities for the month of December, $840. Payment is due in 30days.
Dec.	31		Equipment rental fees earnedduring the second half of December amounted to $24,000, of which$18,720 was received in cash.

Data for Adjusting Entries

a.The advance payment of rent onDecember 1 covered a period of three months.

b.The annual interest rate on thenote payable to Rent-It is 6 percent.

c.The rental equipment is beingdepreciated by the straight-line method over a period of eightyears.

d.Office supplies on hand atDecember 31 are estimated at $720.

e.During December, the companyearned $4,440 of the rental fees paid in advance byMcNamer Construction Company onDecember 8.

f.As of December 31, six days’rent on the backhoe rented to Mission Landscaping on December 26has been earned.

g.Salaries earned by employeessince the last payroll date (December 26) amounted to $1,680 atmonth-end.

h.It is estimated that thecompany is subject to a combined federal and state income tax rateof 40 percent of income before income taxes (total revenue minusall expenses other than income taxes). These taxes will be payablein Year 2.

1-a.Journalize the Decembertransactions. Do not record adjusting entries at thispoint.

1-b.Prepare the necessary adjustingentries for December.

1-c.Prepare closing entries andpost to ledger accounts.