On September 1st, 2007, Mr. Afnan organized a business called Tony's Rentals for the purchase of operating an equipment rental yard. Mr. Afnan's new business was able to begin operations immediately by purchasing the assets and taking over the location of Rent-IT, an equipment rental company that was going out of business.
The company closes its accounts and prepares financial statements at the end of each month.
Part A:
During September, company entered into the following business transactions/events:
Sept 1, Mr. Afnan deposited Rs. 1, 00,000 cash name of Business, Tony's Rentals.
Sept1, Paid Rs. 9000 to Mr. Irfan as three month's advance rent on the rental yard and office formerly occupied by Rent-IT.
Sept 1, Purchased for Rs. 180,000 all the equipment from Rent -IT. Paid Rs. 70,000 cash and issued a one year notes payable for Rs. 110,000, plus interest at the annual rate of 9%.
Sept 4, Purchased office supplies on account from Modern office Co; Rs. 1,630. Payment due in 30 days (these supplies are expected to last for several months; so debit the office supplies asset account)
Sept 8, Received Rs. 10,000 cash from McBrayan Construction Co. as advance payment on rental equipment.
Sept 12, Paid salaries for the first two weeks in September Rs. 3,600
Sept15, Excluding the McBrayan Construction Co advance, equipment rental fees earned during the first 15 days of September amounted Rs.
6100, out of which Rs. 5,300 was received in Cash.
Sept17, Purchased on account from the Earth Movers, Inc., Rs. 340 in parts
needed to repair a rental tractor. Payment is due in 10 days.
Sept23, Collected Rs. 210 of accounts receivable recorded on September 15.
Sept 25, Rented a backhoe (digging machine) to Mission Landscaping at a price of Rs. 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, Rs.3, 600.
Sept 27, Paid the account payable to the Earth Movers, Inc., Rs.340.
Sept 28, Mr. Afnan withdrew Rs. 2,000 cash from business to pay the rent on his personal residence.
Sept 29, Purchased a 12 month public -liability insurance policy for Rs. 2,700.
The policy protects the company against the liability for injuries and property damage cause by its equipment. However the policy goes into effective on October 1.
Sept 30, Received a bill from Universal Utilities for the month of September Rs.270. Payment is due in 30 days.
Sept 30, Equipment rental fees earned during second half of September and received in cash amounted to Rs. 8,450.
Data for adjusting entries:
a. The advance payment of rent on September 1st covered a period of three months.
b. Interest accrued on the notes payable to Rent-IT amounted to Rs. 825 at September 30.
c. The Rental Equipment was depreciated by the straight line method over a period of 10 years.
d. Office supplies on hand at September 30 are estimated at Rs. 1100.
e. During September, the company earned Rs. 4, 840 of the rental fees paid by McBayran Construction Company on September 08.
f. As of September 30, Tony's Rental has earned five days' rent on the backhoe rented to Mission Landscaping on September 25.
g. Salaries earned by employees since the last payroll date (September 26)
amounted Rs. 900 at month end.
From Part A:
(1) State whether all the events (September 1st to 30th September) are transaction or not to Mr. Afnan's business. Mention the reason if an event is why not transaction.
(2) From the transactions of the month September (excluding adjusting entries), state the nature of accounts and state which account will be debited and which account will be credited.
(3) Journalize the transactions of September 01st to September 30th.
(4) Post to ledger accounts
(5) Prepare trial balance
(6) Pass adjusting entries
(7) Prepare adjusted Trial balance
(8) Income Statement for the month of September 30 and Balance Sheet as on September 30.