Recording Adjusting Entries
Brayden Towing Company is at the end of its accounting year, December 31, 2011. The following data that must be considered were developed from the company’s records and related documents:
a. On January 1, 2011, 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 2011.
b. During 2011, office supplies amounting to $1,000 were purchased for cash and debited in full to Supplies. At the end of 2010, the count of supplies remaining on hand was $400. The inventory of supplies counted on hand at December 31, 2011, was $250.
c. On December 31, 2011, Lanie’s Garage completed repairs on one of the company’s trucks at a cost of $1,200; the amount is not yet recorded and by agreement will be paid during January 2012.
d. On December 31, 2011, property taxes on land owned during 2011 were estimated at $1,500.
The taxes have not been recorded, and will be paid in 2012 when billed.
e. On December 31, 2011, the company completed a contract for an out-of-state 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, 2011, a three-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, 2011, the company borrowed $11,000 from the local bank on a one-year, 14 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 $30,000. The company’s federal income tax rate is 30 percent.
Required:
1. Indicate whether each transaction relates to a deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Give the adjusting entry required for each transaction at December 31, 2011.