Question

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 $24,100. Depreciation estimated at $2,200 for the year has not been recorded for 2014.
b.	During 2014, office supplies amounting to $840 were purchased for cash and debited in full to Supplies. At the end of 2013, the count of supplies remaining on hand was $350. The inventory of supplies counted on hand at December 31, 2014, was $450.
c.	On December 31, 2014, Lanie’s Garage completed repairs on one of the company’s trucks at a cost of $1,190; the amount is not yet recorded and by agreement will be paid during January 2015.
d.	On December 31, 2014, property taxes on land owned during 2014 were estimated at $1,320. The taxes have not been recorded, and will be paid in 2015 when billed.
e.	On December 31, 2014, the company completed a contract for an out-of-state company for $7,500 payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction.
f.	On July 1, 2014, a three-year insurance premium on equipment in the amount of $660 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.
g.	On October 1, 2014, the company borrowed $9,600 from the local bank on a one-year, 15 percent note payable. The principal plus interest is payable at the end of 12 months.
h.	The income before any of the adjustments or income taxes was $39,000. The company’s federal income tax rate is 30 percent. (Hint: Compute adjusted income based on (a) through (g) to determine income tax expense.)

10.

value:
1.00 points

Required information

2.	Prepare the adjusting entry required for each transaction at December 31, 2014. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

     

Answer 1

2.

	Date	General Journal	Debit	Credit
a.	Dec. 31, 2014	Depreciation expense	2200
		Accumulated depreciation		2200
		(To record depreciation expense)
b.	Dec. 31, 2014	Supplies expense ($350 + $840 - $450)	740
		Supplies		740
		(To record supplies expense)
c.	Dec. 31, 2014	Repairs expense	1190
		Accounts payable		1190
		(To record repairs bill payable)
d.	Dec. 31, 2014	Property tax expense	1320
		Property tax payable/Accounts payable		1320
		(To record property taxes accrued)
e.	Dec. 31, 2014	Accounts receivable	7500
		Sales revenue		7500
		(To record revenue earned)
f.	Dec. 31, 2014	Insurance expense ($660 x 6/36)	110
		Prepaid insurance		110
		(To record prepaid insurance expired)
g.	Dec. 31, 2014	Interest expense ($9600 x 15% x 3/12)	360
		Interest payable		360
		(To record interest accrued on note payable)
h.	Dec. 31, 2014	Income tax expense	12174
		Income tax payable		12174
		(To record income taxes payable)

Working:

Unadjusted income $	39000
Adjustments:
a.	-2200
b.	-740
c.	-1190
d.	-1320
e.	7500
f.	-110
g.	-360
Adjusted income	40580
Income tax expense (30% x $40580) $	12174