Question

I need to find Brokeback's net income.

Check my B. . Brokeback Towing Company is at the end of its accounting year, December 31, 2018. The following data that must be considered were developed from the company's records and related documents: a. On July 1, 2018, a two-year insurance premium on equipment in the amount of $456 was paid and debited in full to Prepaid b. At the end of 2018, the unadjusted balance in the Supplies account was $1,000. A physical count of supplies on December 31, 2018, c. On December 31, 2018, YY's Garage completed repairs on one of Brokeback's trucks at a cost of $740. The amount is not yet recorded. It will be paid during January 2019. d. On December 31, 2018, the company completed a contract for an out-of-state company for $7,650 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction e. On July 1, 2018, the company purchased a new hauling van. Depreciation for July-December 2018, estimated to total $2,450, has As of December 31, the company owes Interest of $440 on a bank loan taken out on October 1, 2018. The interest will be paid when 9. Assume the income after the preceding adjustments but before income taxes was $24,000. The company's federal income tax rate is 30%. Compute and record income tax expense. 1 ces Required: 1. Give the adjusting journal entry required for each item at December 31, 2018. 2. If adjustments were not made each period, the financial results could be materially misstated. Determine the amount by which Brokeback's net income would have been understated, or overstated, had the adjustments in requirement 1 not been made. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Give the distino inumal entry reduired for each item at December 31, 2018. (If no entry is required for a transaction/event. select "n < Prey 3 of 3 Next

Answer 1

Answer: 2

Brokeback’s net income

overstated

$4,054

Explanation:

Total revenue as per requirement 1 = Service revenue (Transaction d) = $7,650

Insurance expense (Transaction a)	114
Supplies expense (Transaction b)	760
Repair & Maint. expense (Transaction c)	740
Depreciation expense (Transaction e)	2,450
Interest expense (Transaction f)	440
Income tax expense (Transaction g)	7,200
Total expense as per requirement 1	$11,704

Difference in Net income = $11,704 - $7,650 = $4,054.

Since, total expense as per requirement 1 is more than total revenue as per requirement 1, if the adjustments entry not been made it would results is overstating of net income by $4,054