Jason\'s Delivery Service is at the end of its accounting year, 12/31/14. The fo

Question

Jason's Delivery Service is at the end of its accounting year, 12/31/14. The following data that must be considered were developed from the company's records and related documents:
a. On 1/1/14 the company purchased a new hauling van at a cash cost of $24, 600. Depreciation estimated at $4K for the year has not been recorded for 2014.
b. During 2014, office supplies amounting to $1,000 were purchased for cash and debited in full to supplies. At the end of 2013, the count of supplies remaining on hand was $400. The inventory of supplies counted on hand at 12/31/14 was $250.
c. On 12/31/14 Debra's Vehicle Repairs 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 jan 2015.
d. On 12/31/14 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 12/31/14 the company completed a contract for an out of state company for $6K payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction.
f. On 7/1/14, a 3 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 10/1/14, the company borrowed $11K from the local bank on a 1 year, 14% 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 $30K. The company's federal income tax rate is 30%. (Compute adjusted income based on (a) through (g) to determine income tax expense).

Questions:
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 12/31/14.

Explanation / Answer

a) deferred expense DR Depreciation expense 4,000 CR Accumulated depreciation 4,000 b) deferred expense DR Supplies expense 1,150 CR Supplies 1,150 (400+1,000-250) c) Accrued expense DR Repair expenses 1,200 CR Accounts payable 1,200 d) Accrued expense DR Property tax expense 1,500 CR Accrued liabilities 1,500 e) Accrued revenue DR Accounts receivable 6,000 CR Service Revenue 6,000 f) Deferred expense DR Insurance expense 200 CR prepaid insurance 200 (1,200/6) g) Accrued expense DR Interest expense 385 CR Interest Payable 385 (11,000*.14/4 h) Income before taxes is 30,000+6,000-4,000-1,200-1,150-1,500-200-385= 27,565*.3=8,269.50 DR Income tax expense 8,269.50 CR Accrued income taxes 8,269.50 (Accrued expense)

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