Question

Lamorte Towing Company is at the end of its fiscal 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 $ 24,600. Depreciation estimated at $ 4,000 for the year has not been recorded for 2014.
b. During 2014, office supplies amounting to $ 1,000 were purchased for cash and debited to supplies inventory. At the end of 2013, the inventory of supplies remaining on hand (unused) was $ 400. The inventory of supplies on hand at December 31, 2014, was $ 250.
c. On December 31, 2014, the company completed repairs on one of its trucks at a cost of $ 1,200; 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 $ 1,500. 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 another company for $ 6,000 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 one- year insurance premium on equipment in the amount of $ 1,200 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 $ 11,000 from the local bank on a one- year, 6 percent note payable. The principal plus interest is payable on September 30, 2015.
h. Earnings before any of the adjustments or income taxes equalled $ 30,000. The company’s income tax rate is 40 percent. (Hint: Compute adjusted pretax earnings based on transactions (a) through (g) to determine the income tax expense for 2014.)
Required:
1. Indicate whether each transaction relates to a deferred revenue, a deferred expense, an accrued revenue, or an accrued expense.
2. Prepare the adjusting entry required for each transaction at December 31, 2014.
3. Using the following headings, indicate the effect of each adjusting entry and the amount of each. Use + for increase, – for decrease, and “ N” for no effect.


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  • CreatedAugust 04, 2015
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