Answered Essay: Martin Towing Company is at the end of its accounting year ending December 31.

Martin Towing Company is at the end of its accounting year ending December 31. The following data that must be considered were developed from the company’s records and related documents:

a)On January 1 of the current year, the company purchased a new hauling van at a cash cost of $24,700. Depreciation estimated at $2,600 for the year has not been recorded for the current year.

b) During the current year, office supplies amounting to $1,000 were purchased for cash and debited in full to Supplies. At the end of last year, the count of supplies remaining on hand was $400. The inventory of supplies counted on hand at the end of the current year was $350.

c) On December 31 of the current year, Lanie’s Garage completed repairs on one of the company’s trucks at a cost of $1,030; the amount is not yet recorded by Martin and by agreement will be paid during January of next year.

d)On December 31 of the current year, property taxes on land owned during the current year were estimated at $1,350. The taxes have not been recorded and will be paid in the next year when billed.

e)On December 31 of the current year, the company completed towing service for an out-of-state company for $7,400 payable by the customer within 30 days. No cash has been collected, and no journal entry has been made for this transaction.

f)On July 1 of the current year, a three-year insurance premium on equipment in the amount of $1,140 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1 of the current year.

g)On October 1 of the current year, the company borrowed $9,600 from the local bank on a one-year, 11 percent 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 $38,000. The company’s federal income tax rate is 30 percent. (Hint: Compute adjusted pre-tax income based on (a) through (g) to determine income tax expense.)

question: Journal entry

1-On October 1 of the current year, the company borrowed $9,600 from the local bank on a one-year, 11 percent note payable. The principal plus interest is payable at the end of 12 months.

2-The income before any of the adjustments or income taxes was $38,000. The company’s federal income tax rate is 30 percent. (Hint: Compute adjusted pre-tax income based on (a) through (g) to determine income tax

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