Pedro Towing Company is at the end of its accounting year, December 31, 2008. The following data that must be considered were developed from the company”s record and related documents.
- On July 1, 2008 a three year insurance premium on equipment in the amount of $13,000 was paid and debited in full to prepaid insurance on that date. Coverage began on July 1.
- During 2008, office supplies amounting to $8,700 were purchased for cash and debited in full to supplies. At the end of 2007, the count of supplies remaining on hand was $2,200. The inventory of supplies counted on hand at December 31, 2008, was $3,300.
- On December 31, 2008, HH”s garage completed repairs on one of the company”s trucks at a cost of $8,700 the amount is not yet recorded and by agreement will be paid during January 2009.
- On December 31, 2008, property taxes on land owned during 2008 were estimated at $17,400. The taxes have not been recorded, and will be paid in 2009 when billed.
- On December 31, 2008, the company completed a contract for an out of state company for $87,000 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.
- On January 1, 2008, the company purchased a new hauling van at a cash cost of $312,000. Depreciation estimated at $12,000 for the year has not been recorded for 2008.
- On October 1, 2008, the company borrowed $108,400 from a local on a one year, 12 percent note payable. The principle plus interest is payable at the end of 12 months.
- The income before any of the adjustments or income taxes was $325,200. The Company”s federal income tax rate is 30 percent. (Hint: compute adjusted income based on (a) through (g) to determine income tax expense.)
Required:
1. Indicate whether each transaction relates to deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Give the adjusting entry required for each transaction at December 31, 2008.