P10-1A Prepare current liability entries, adjusting entries, and current liabili

ID: 2530298 • Letter: P

Question

P10-1A Prepare current liability entries, adjusting entries, and current liabilities section. On January 1, 2017, the ledger of Romada Company contained these liability accounts. Accounts Payable Sales Taxes Payable Unearned Service Revenue $42,500 6,600 19,000 During January, the following selected transactions occurred Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 59, $18,000 note. 5 Sold merchandise for cash totaling $6,254, which includes 6% sales taxes. Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.) Paid state treasurer's department for sales taxes collected in 12 14 December 2016, $6,600. 20 Sold 500 units of a new product on credit at $48 per unit, plus 6% sales tax. During January, the company's employees earned wages of $70,000. Withholdings related to these wages were $5,355 for Social Security (FICA). $5,000 for federal income tax, and $1,500 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31. Instructions (a) Journalize the January transactions (b) Journalize the adjusting entries at January 31 for the outstanding note payable and for salaries and wages expense and payroll tax expense (c) Prepare the current liabilities section of the balance sheet at January 31, 2017 Assume no change in Accounts Payable

Explanation / Answer

(ALL VAULES IN $)

To Notes Payable A/c cr. 18000

To Sales A/c cr. 5900

To Sales Tax Payable cr. 354

To Service Revenue cr. 10000

To Cash A/c cr. 6600

To Sales A/c (500 units X $48) cr. 24000

To Sales Tax Payable cr. 1440

2. 31st Jan Salaries & Wages Expenses A/c dr. 70000

To FICA Taxes Payable cr. 5355

To Federal Income Tax Payable cr. 5000

To State Income Tax Payable cr. 1500

To Salaries & Wages Payable cr. 58145

Payroll Taxes Expenses dr. 5355

To FICA Taxes Payable cr. 5355

Interest Expense($18000X5%X1/12) dr. 75

To Interest Payable cr. 75

Hiatt Company

Balance Sheet (Extract)

As of the end of the month January 31, 2014

Current Liabilities

Amount

Accounts Payable

42500

Sales Tax Payable

1794

Unearned Service Revenue

9000

Notes Payable

18000

Interest Payable

FICA Taxes Payable

10710

Federal Income Tax Payable

5000

State Income Tax Payable

1500

Salaries & Wages Payable

58145

Total Current Liabilities

146724