Required: 1 . Give the adjusting journal entry required for each item at Decembe
ID: 2490346 • Letter: R
Question
Required:
1.
Give the adjusting journal entry required for each item at December 31, 2015.
Brokeback Towing Company is at the end of its accounting year, December 31, 2015. The following data that must be considered were developed from the company’s records and related documents:
a. On July 1, 2015, a two-year insurance premium on equipment in the amount of $600 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.
b,
On December 31, 2015, the company completed a contract for an out-of-state company for $7,950 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.
Brokeback Towing Company is at the end of its accounting year, December 31, 2015. The following data that must be considered were developed from the company’s records and related documents:
a. On July 1, 2015, a two-year insurance premium on equipment in the amount of $600 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.
I know it is Insurance Expense and Prepaid Insurance, but I don’t know what is the number of Debit and Credit and how to get these number.
c.On December 31, 2015, YY’s Garage completed repairs on one of Brokeback’s trucks at a cost of $800. The amount is not yet recorded. It will be paid during January 2016.
Required:
1.
Give the adjusting journal entry required for each item at December 31, 2015.
Explanation / Answer
In the books of Brokeback's towing company
entry to be passed on 31.12.2015 as under:
a) Insurance expenses a/c Dr. 150
To Prepaid Insurance 150
(Being in current year 6 month premium will be paid and remaining will be prepaid insurance)
NOTE: We have paid the insurance premium on 1/7/15 for 24 months, hence in year 2015 it will 150 for 6 month, for 2016 it will be 300 for full year and for 2017 it will be 150 for 6 month. So after passing the above entry in prepaid insurance account the balance will be 600-150 = 450 that will be shown in liability side of the balance sheet.
b) Account Receivable a/c Dr $ 7950
To Revenue account $ 7950
(Being contract/job completed of out-of-state-company)
c) Repair Expenses a/c Dr $ 800
To Outstanding Expenses $ 800
(Being repair of truck expenses due and will be paid to YY's Garage)
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