Brokeback Towing Company is at the end of its accounting year, December 31, 2015

Question

Brokeback Towing Company is at the end of its accounting year, December 31, 2015. The following data that must be considered were developed from the company’s records and related documents: a. On July 1, 2015, a two-year insurance premium on equipment in the amount of $792 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1. b. At the end of 2015, the unadjusted balance in the Supplies account was $1,000. A physical count of supplies on December 31, 2015, indicated supplies costing $380 were still on hand. c. On December 31, 2015, YY’s Garage completed repairs on one of Brokeback’s trucks at a cost of $880. The amount is not yet recorded. It will be paid during January 2016. d. On December 31, 2015, the company completed a contract for an out-of-state company for $8,350 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction. e. On July 1, 2015, the company purchased a new hauling van. Depreciation for July–December 2015, estimated to total $3,150, has not been recorded. f. As of December 31, the company owes interest of $580 on a bank loan taken out on October 1, 2015. The interest will be paid when the loan is repaid on September 30, 2016. No interest has been recorded yet. g. Assume the income after the preceding adjustments but before income taxes was $38,000. The company’s federal income tax rate is 25%. Compute and record income tax expense. Required: 1. Give the adjusting journal entry required for each item at December 31, 2015. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.

Explanation / Answer

DR CR Insurance expense 198 Prepaid insurance 198 Insurance expense 792/2 years *6/12 Supplies expense(1000-380) 620 Supplies 620 Repairs and maintenance expense 880 . Accrued liabilities 880 Accounts receivable 8350 Service revenue 8350 Depreciation expense 3150 Accumulated depreciation 3150 Interest expense 580 Interest payable 580 . Income tax expense (38000*.25) 9500 Tax Payavle 9500

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.