Brokeback Towing Company is at the end of its accounting year,December 31, 2017. The following data that must be considered weredeveloped from the company’s records and relateddocuments:

1. On July 1, 2017, a three-year insurance premium on equipment inthe amount of $900 was paid and debited in full to PrepaidInsurance on that date. Coverage began on July 1.
2. At the end of 2017, the unadjusted balance in the OfficeSupplies account was $1,250. A physical count of supplies onDecember 31, 2017, indicated supplies costing $450 were still onhand.
3. On December 31, 2017, YY’s Garage completed repairs on one ofBrokeback’s trucks at a cost of $900. The amount is not yetrecorded. It will be paid during January 2018.
4. In December, the 2017 property tax bill for $2,000 was receivedfrom the city. The taxes, which have not been recorded, will bepaid on February 15, 2018.
5. On December 31, 2017, the company completed the work on acontract for an out-of-province company for $10,400 payable by thecustomer within 30 days. No cash has been collected and no journalentry has been made for this transaction.
6. On July 1, 2017, the company purchased a new hauling van.Depreciation for July to December 2017, estimated to total $3,000,has not been recorded.
7. As of December 31, the company owes interest of $625 on a bankloan taken out on October 1, 2017. The interest will be paid onSeptember 30, 2018, when the loan is repaid. No interest has beenrecorded yet.
8. The income before any of the adjustments or income taxes was$35,000. 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.

1. Give the adjusting journal entry requiredfor each transaction at December 31, 2017. (Do not roundintermediate calculations. If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field.)

2. Without the adjustments made in requirement1, by what amount would Brokeback’s net income have beenunderstated or overstated?