P4-5 Determining Financial Statement Effects of Adjusting Entries LO4-1 The foll
ID: 2489098 • Letter: P
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P4-5 Determining Financial Statement Effects of Adjusting Entries LO4-1 The following information applies to the questions displayed below Martin Towing Company Is at the end of its accounting year, December 31, 2014. The following data that must be considered were developed from the company's records and related documents: a. On January 1, 2014, the company purchased a new hauling van at a cash cost of $24,200. Depreclation estimated at $2,000 for the year has not been recorded for 2014. b. During 2014, office supplies amounting to $980 were purchased for cash and debited in full to Supplies. c. On December 31, 2014, Lanie's Garage completed repairs on one of the company's trucks at a cost of d. On December 31, 2014, property taxes on land owned during 2014 were estimated at $1,400. The taxes e. On December 31, 2014, the company completed a contract for an out-of-state company for $6,700 At the end of 2013, the count of supplies remaining on hand was $220. The inventory of supplies counted on hand at December 31, 2014, was $390. $1,050; the amount is not yet recorded and by agreement will be paid during January 2015. have not been recorded, and will be paid in 2015 when billed. payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction. t. On July 1, 2014, a three-year insurance premium on equipment in the amount of $840 was pald and g. On October 1, 2014, the company borrowed $9,600 from the local bank on a one-year, 13 percent note h. The income before any of the adjustments or income taxes was $32,000. The company's federal income debited in full to Prepald Insurance on that date. Coverage began on July 1 payable. The principal plus interest is payable at the end of 12 months tax rate is 40 percent. (Hint: Compute adjusted income based on (a) through (g) to determine income tax expense. References Section Break P4-5 Determining Financial Statement Effects of AdjustingExplanation / Answer
(1)
Accrued expense: An expense that has been recognized but not paid (liability)
Deferred expense: A future expense that has been already paid but not yet been incurred (asset)
Deferred revenue: Cash received for service/product to be provided later (liability)
Accrued revenue: Good/service has been provided but cash has not been received (asset)
(a) Accrued expense
(b) Deferred expense
(Since incurred expense is higher than actual expense incurred during year)
(c) Accrued revenue
(d) Accrued expense
(e) Accrued revenue
(f) Deferred expense
(g) Accrued expense
(h) Accrued expense
Note: First question is answered.
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