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Accounting- Closing entries

Hi, I would like to know if this transaction can be or not included in the closing entries. The exercise is:

The company is a corporation of equipment renatals.

Dic 23. Rented a backhoe to Mission Landscaping at a price of 250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

Thanks.

If the year end is the 31st December ,
Then there are 9 days @ $250 to be
Accrued as rental income.
So, the answer is YES!

Quote:

Originally Posted by ROLCAM

If the year end is the 31st December ,
then there are 9 days @ $250 to be
accrued as rental income.
So, the answer is YES !!

WhaT ACCOUNTS WOULD BE?

And those accoutn must be in the jeneral journal? And in the t accounts?

I have another Question. What accounts would be in this statement:
Dec 29, Susquehanna equipment rental was suit along with other cpmpanies for $2500. Other company who I had borrow an equipment rental left the rented backhoe in a fenced construction owned by collier costruction. After working hrs Danverport had climbed the fence to play on parked cosntruction equipment. He fell and broke his arm. The extent of the company legal and financial responsibility for this accident, if any, can not be determined at this time. (note: this event does not required entry in a juornal, but may requiere disclosure in note accompying the statements)

How can I answer this?

Aleja,

1) The closing entry must be made in the General Journal.
2) Subsequently all entries in the General Journal must be posted in the General Ledger.
3) The General Journal is as follows:-

DEBIT Equipment Rentals Account $2,250
CREDIT Receivables Account $2,250

Being an accrual of $250 rentals for 9 days.

4) Your second problem.

The liability is NOT YET real.
It is called a CONTINGENT LIABILITY (might
Happen in the future)
You are quite right.
This is to be dealt with by way of a note to the Balance Sheet

Thanks!!

Aleja,

You are most welcome.!

Quote:

Originally Posted by ROLCAM

Aleja,

1) The closing entry must be made in the General Journal.
2) Subsequently all entries in the General Journal must be posted in the General Ledger.
3) The General Journal is as follows:-

DEBIT Equipment Rentals Account $2,250
CREDIT Receivables Account $2,250

Being an accrual of $250 rentals for 9 days.

4) Your second problem.

The liability is NOT YET real.
It is called a CONTINGENT LIABILITY (might
happen in the future)
You are quite right.
This is to be dealt with by way of a note to the Balance Sheet

Once again, you have answered the question without carefully reading it. Of you were to read the question again very carefully, you will realise that the company has rented equipment to another company which makes the rental as its income and not an expense.

As for the second question, you have not given a careful attention to the problem. You will notice that the equipment was parked in a fenced location and one Davenport climbed the fence and while playing he was injured. This is a case of trespass and, as such, the firm is not liable for any damages. What purpose will it serve if the matter was disclosed by way of a note?

I would suggest you read IAS 37 Provisions and contingencies.

Quote:

Originally Posted by rehmanvohra

As for the second question, you have not given a careful attention to the problem. You will notice that the equipment was parked in a fenced location and one Davenport climbed the fence and while playing he was injured. This is a case of trespass and, as such, the firm is not liable for any damages. What purpose will it serve if the matter was disclosed by way of a note?

That depends on where you're at. Around here, trust me, a company could very easily lose a lawsuit over this, never mind that someone climbed the fence. (I don't say I agree with it, just that it could happen.)

Quote:

Originally Posted by ROLCAM

DEBIT Equipment Rentals Account $2,250
CREDIT Receivables Account $2,250

I have to say I'm not quite sure where this entry is coming from either. This is like giving a credit to them for something already charge.

This isn't the entry for accruing the rental fees. But I know you know better. (Perhaps forgot your coffee?) But it's not the closing entry either.

(And rehmanvohra, while the entry doesn't make sense, I don't think there's a confusion between expense/revenue. Note he's used a receivable. I think it is indeed meant to be a revenue.)

I also personally would count 8 days. In order to count 9 days, we'd have to assume they got it in the a.m. and that one day's rent means bringing it back by a certain time, and that if not brought back by that time, it's into a second day. If it doesn't say that, I'd assume 8 days, like how we count nearly everything else.

But whatever...

Aleja, the accrual entry would be backwards from what Rolcam said:
Dr. Receivables/Cr. Rent Revenues

You're asking about the closing entry? The closing entry on all revenues would be to debit the revenue and credit income summary (or whatever they call it where you are). But you don't close a specific transaction. You close the totals that are in an account at the end of the period. You wouldn't close the receivables. And the rent revenue (I would hope) would have a much, much bigger amount in it than just this one rental, due to other rentals that have taken place. So I don't understand how this relates to closing entries.

(Sometimes textbooks will actually have you close only one entry, just to make the point of a new revenue or expense account requiring closing. Which I've always thought was a little silly, but perhaps that is what the problem wants?)