Smith Pipeline Company maintains a certain level of gas inventory for system operating purposes. During the twelve months ended May 2008, Smith used 900,000 MMBtu to operate the compressor stations on its system. Smith received 800,000 MMBtu from its customers for reimbursement of fuel over the same twelve-month period. Lucky filed a report with FERC in September 2008 that reported the excess fuel costs of 100,000 MMBtu and FERC approved the recovery of these costs from Smith’s customers via a one-time billing in December 2008. Spot prices averaged \($2.40\) during the twelve months of operations and the average cost of inventory gas was \($2.60.\) Assume that this fuel activity was the only activity on the pipeline during this period and that Smith uses the inventory method to account for system gas.

REQUIRED:

Prepare the journal entries necessary to record the above activities.