Brokeback Towing
Brokeback Towing Company is at the end of its accounting year, which is December 31, 2020. The following data that must be considered were developed from the company’s records and related documents:
a. On July 1, 2020, a three-year insurance premium on equipment in the amount of $720 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.
b. At the end of 2020, the unadjusted balance in the Office Supplies account was $1,100. A physical count of supplies on December 31, 2020, indicated supplies costing $360 were still on hand.
c. On December 31, 2020, YY’s Garage completed repairs on one of Brokeback’s trucks at a cost of $840. The amount is not yet recorded. It will be paid during January 2021.
d. In December, the 2020 property tax bill for $1,760 was received from the city. The taxes, which have not been recorded, will be paid on February 15, 2021.
e. On December 31, 2020, the company completed the work on a contract for an out-of-province company for $8,900 payable by the customer within 30 days. No cash has been collected and no
f. On July 1, 2020, the company purchased a new hauling van.
g. As of December 31, the company owes interest of $550 on a bank loan taken out on October 1, 2020. The interest will be paid on September 30, 2021, when the loan is repaid. No interest has been recorded yet.
h. The income before any of the adjustments or income taxes was $32,000. The company’s federal income tax rate is 30 percent. Compute adjusted income based on all of the preceding information, and then determine and record income tax expense.
Required: Give the
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