P11-1A Prepare current liability entries, adjusting entries, and current liabilities section.
On January 1, 2008, the ledger of Mane 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. Jan. 5 Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. 12 Provided 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 2007 ($7,700). 20 Sold 800 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $18,000 from UCLA Bank on a 3-month, 8%, $18,000 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 on third of a month for the UCLA Bank note.)
(c) Prepare the current liabilities section of the balance sheet at January 31, 2008. Assume no change in accounts payable.
SOLUTION PREVIEW
MANE COMPANY
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Date
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Account Titles
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Debit
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Credit
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(a)
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Jan 5
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Cash
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22,680
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Sales
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21,000
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Sales tax payable
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1,680
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