*ONLY NEED STEPS 4 AND 5
Fredâs Fun-Time Arcade Rentals-Accounting Cycle
On December 1, 2014, Fred and Patsy Forrest formed a corporationcalled Fredâs Fun-Time Arcade Rentals. The newly formed corporationrents retro video arcade games, pinball machines, dunk tanks, photobooths, moon bounces and more for businesses, community centers,schools, group events, and parties. Fredâs Fun-Time Arcade Rentalsimmediately began operations by taking over the location of ArcadeAlley Games, a vintage classic arcade game rental company thatclosed. Fredâs 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. Closingentries are performed annually on December 31. During December, thecorporation entered into the following transactions:
Dec. 1 Issued to Fred and Patsy Forrest 30,000shares of capital stock in exchange for a total of $300,000cash.
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, 2015.
Dec. 1 Paid $15,000 to Sunshine Realty as threemonthsâ advance rent for warehouse used to store the arcade gamemachines and office formerly occupied by Arcade Alley Games.
Dec. 4 Purchased office supplies on account fromOffice Depot, $1,300. Payment is due in 30 days. (These suppliesare expected to last for several months; debit the Office Suppliesasset account.)
Dec. 8 Received $6,000 cash as advance payment on pinball arcadegame rentals from Party Planners, Inc. (Credit Unearned RentalFees.)
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. 17 Purchased on account from Arcade Restoration, Inc., $400in parts needed to repair a dunk tank machine. (Debit an expenseaccount.) Payment is due in 10 days.
Dec. 23 Collected $2,100 of the accounts receivable recorded onDecember 15.
Dec. 26 Rented a video poker machine to OâMalleyâs Pub at aprice of $150 per day, to be paid when the video poker machine isreturned. OâMalleyâs Pub expects to keep the video poker machinefor a month.
Dec. 26 Paid biweekly salaries, $5,400.
Dec. 27 Paid the account payable to Arcade Restoration, Inc.,$400.
Dec. 28 Declared a dividend of 10 cents per share, payable onJanuary 15, 2014.
Dec. 29 Purchased a 12-month insurance policy for $6,000. Thepolicy goes into effect on January 1, 2014.
Dec. 31 Received a bill from Verizon Communications for phoneservice for the month of December, $700. Payment is due in 30days.
Dec. 31 Arcade game rental fees earned during the second half ofDecember amounted to $25,000, of which $19,000 was received incash.
Data for Adjusting Entries
a. The advance payment of rent on December 1 covered a period ofthree months.
b. The annual interest rate on the note payable to Arcade AlleyGames is 6 percent.
c. The arcade game machines are being depreciated by thestraight-line method over a period of eight years.
d. Office supplies on hand at December 31 are estimated at$700.
e. During December, the company earned $3,700 of the rental feespaid in advance from Party Planners, Inc. on December 8.
f. As of December 31, six daysâ rent on the pinball machinesrented to OâMalleyâs Pub on December 26 has been earned.
g. Salaries earned by employees since the last payroll date(December 26) amounted to $1,600 as of month-end.
h. It is estimated that the company is subject to a combinedfederal and state income tax rate of 30 percent of income beforeincome taxes (total revenue minus all expenses other than incometaxes). These taxes will be paid in 2015.
Instructions
Perform the following steps of the accounting cycle for themonth of December:
1. Journalize the December transactions.Do not record adjusting entries at this point.
2. Post the December transactions to theappropriate ledger accounts.
3. Prepare the unadjusted trialbalance.
4. Prepare the necessary adjustingentries for December. (adjusting entries)
5. Post the December adjusting entries tothe appropriate ledger accounts. (adjusted ledger account)
6. Prepare an income statement andstatement of retained earnings for the year ended December 31, anda balance sheet (in report form) as of December 31
7. Prepare closing entries and post toledger accounts.
8. Prepare an after-closing trial balanceas of December 31.
*ONLY NEED STEPS 4 AND 5
Fredâs Fun-Time Arcade Rentals-Accounting Cycle
On December 1, 2014, Fred and Patsy Forrest formed a corporationcalled Fredâs Fun-Time Arcade Rentals. The newly formed corporationrents retro video arcade games, pinball machines, dunk tanks, photobooths, moon bounces and more for businesses, community centers,schools, group events, and parties. Fredâs Fun-Time Arcade Rentalsimmediately began operations by taking over the location of ArcadeAlley Games, a vintage classic arcade game rental company thatclosed. Fredâs 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. Closingentries are performed annually on December 31. During December, thecorporation entered into the following transactions:
Dec. 1 Issued to Fred and Patsy Forrest 30,000shares of capital stock in exchange for a total of $300,000cash.
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, 2015.
Dec. 1 Paid $15,000 to Sunshine Realty as threemonthsâ advance rent for warehouse used to store the arcade gamemachines and office formerly occupied by Arcade Alley Games.
Dec. 4 Purchased office supplies on account fromOffice Depot, $1,300. Payment is due in 30 days. (These suppliesare expected to last for several months; debit the Office Suppliesasset account.)
Dec. 8 Received $6,000 cash as advance payment on pinball arcadegame rentals from Party Planners, Inc. (Credit Unearned RentalFees.)
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. 17 Purchased on account from Arcade Restoration, Inc., $400in parts needed to repair a dunk tank machine. (Debit an expenseaccount.) Payment is due in 10 days.
Dec. 23 Collected $2,100 of the accounts receivable recorded onDecember 15.
Dec. 26 Rented a video poker machine to OâMalleyâs Pub at aprice of $150 per day, to be paid when the video poker machine isreturned. OâMalleyâs Pub expects to keep the video poker machinefor a month.
Dec. 26 Paid biweekly salaries, $5,400.
Dec. 27 Paid the account payable to Arcade Restoration, Inc.,$400.
Dec. 28 Declared a dividend of 10 cents per share, payable onJanuary 15, 2014.
Dec. 29 Purchased a 12-month insurance policy for $6,000. Thepolicy goes into effect on January 1, 2014.
Dec. 31 Received a bill from Verizon Communications for phoneservice for the month of December, $700. Payment is due in 30days.
Dec. 31 Arcade game rental fees earned during the second half ofDecember amounted to $25,000, of which $19,000 was received incash.
Data for Adjusting Entries
a. The advance payment of rent on December 1 covered a period ofthree months.
b. The annual interest rate on the note payable to Arcade AlleyGames is 6 percent.
c. The arcade game machines are being depreciated by thestraight-line method over a period of eight years.
d. Office supplies on hand at December 31 are estimated at$700.
e. During December, the company earned $3,700 of the rental feespaid in advance from Party Planners, Inc. on December 8.
f. As of December 31, six daysâ rent on the pinball machinesrented to OâMalleyâs Pub on December 26 has been earned.
g. Salaries earned by employees since the last payroll date(December 26) amounted to $1,600 as of month-end.
h. It is estimated that the company is subject to a combinedfederal and state income tax rate of 30 percent of income beforeincome taxes (total revenue minus all expenses other than incometaxes). These taxes will be paid in 2015.
Instructions
Perform the following steps of the accounting cycle for themonth of December:
1. Journalize the December transactions.Do not record adjusting entries at this point.
2. Post the December transactions to theappropriate ledger accounts.
3. Prepare the unadjusted trialbalance.
4. Prepare the necessary adjustingentries for December. (adjusting entries)
5. Post the December adjusting entries tothe appropriate ledger accounts. (adjusted ledger account)
6. Prepare an income statement andstatement of retained earnings for the year ended December 31, anda balance sheet (in report form) as of December 31
7. Prepare closing entries and post toledger accounts.
8. Prepare an after-closing trial balanceas of December 31.
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