On January 1, 2014, the ledger of Accardo Company contains the following liability accounts.
|
Accounts Payable |
$52,000 |
|
Sales Taxes Payable |
7,700 |
|
Unearned Service Revenue |
16,000 |
During January, the following selected transactions occurred.
|
5 |
Sold merchandise for cash totaling $20,520, which includes 8% sales taxes. |
|
|
12 |
Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.) |
|
|
14 |
Paid state revenue department for sales taxes collected in December 2013 ($7,700). |
|
|
20 |
Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1-year warranty. |
|
|
21 |
Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note. |
|
|
25 |
Sold merchandise for cash totaling $12,420, which includes 8% sales taxes. |
Instructions
(a)Journalize the January transactions.
(b)Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product. (Hint:Use one-third of a month for the Girard Bank note.)
(c)Prepare the current liabilities section of the balance sheet at January 31, 2014. Assume no change in accounts payable.