Recording Adjusting Entries

1. Recording Adjusting Entries Group 3 P4-3 Page 212

2. Prompt • Totka 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 records and related documents.

3. A. On July 1, 2008, 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. 1. Deferred Expense 2.

4. B. During 2008, office supplies amounting to $800 were purchased for cash and debited in full to Supplies. At the end of 2007, the count of supplies remaining on hand was $200. The inventory of supplies counted on hand at December 31, 2008, was $300. 1. Deferred Expense 2.

5. C. On December 31, 2008, HH’s Garage completed repairs on one of the company’s trucks at a cost of $800; the amount is not yet recorded and by agreement will be paid during January 2009 1. Accrued Expense 2.

6. D. On December 31, 2008, property taxes on land owned during 2008 were estimated at $ 1,600. The taxes have not been recorded, and will be paid in 2009 when billed 1. Accrued Expense 2.

7. E. On December 31. 2008, the company completed a contract for an out-of-state company for $8,000 payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction. 1. Accrued Revenue 2.

8. F. On January 1, 2008, the company purchased a new hauling van at a cash cost of $23,600. Depreciation estimated at $1,100 for the year has not been recorded for 2008. 1. Deferred Expense 2.

9. G. On October 1, 2008, the company borrowed $10,000 from the local bank on a one-year , 12 percent note payable. The principal plus interest is payable at the end of 12 months. 1. Accrued Expense 2.

10. H. The income before any of the adjustments or income taxes was $30,000. The company’s federal income tax rate is 30 percent. 1. Accrued Expense 2. -