Question

Payable Transactions

Richmond Company engaged in the following transactions during 2019:

1. Purchased $160,000 of supplies from ABC Supplies on February 16. Amount due in full on March 31.

2. Paid for 25% of the purchased merchandise (Transaction a) on February 26.

3. On March 31 negotiated a payment extension with ABC for the remainder of the balance from the February 16 purchase by signing a 1-year, 10% note.

4. Borrowed $300,000 on a 10-month, 8% interest-bearing note on April 30.

5. Purchased $78,000 of merchandise on June 4. Amount due in full on June 30.

6. Paid for the purchased merchandise (Transaction e) on June 24.

7. Received from Haywood Inc. on August 19, a $22,000 deposit against a total selling price of $220,000 for services to be performed for Haywood.

8. Paid quarterly installments of Social Security and Medicare and individual income tax withholdings, as shown below, on October 15. The Social Security and Medicare were previously recorded as expenses during the quarter and the amounts paid represent both the employee and employer shares (50% each):

   Social Security taxes withheld	$185,000
   Medicare taxes withheld	43,266
   Federal income taxes withheld	319,000

9. On December 15, Richmond completed the services ordered by Haywood on August 19. Haywood's remaining balance of $198,000 is due on January 31.

Required:

1. Prepare journal entries for these transactions. If an amount box does not require an entry, leave it blank.

a. Feb. 16	Supplies
	Accounts Payable
	(Record purchase of supplies on account)
b. Feb. 26	Accounts Payable
	Cash
	(Record partial payment of supplier)
c. Mar. 31	Accounts Payable
	Notes Payable
	(Record issuance of note to cover unpaid portion of account payable)
d. Apr. 30	Cash
	Accounts Payable
	(Record issuance of note)
e. June 4	Inventory
	Accounts Payable
	(Record purchase of inventory on account)
f. June 24	Accounts Payable
	Cash
	(Record payment of supplier)
g. Aug. 19	Cash
	Unearned Service Revenue
	(Record receipt of deposit for services not yet performed)
h. Oct. 15	Social Security Taxes Payable (Employee)
	Social Security Taxes Payable (Employer)
	Medicare Taxes Payable (Employee)
	Medicare Taxes Payable (Employer)
	Federal Income Taxes Withholding Payable
	Cash
	(Record employer payroll taxes)
i. Dec. 15	Cash
	Service Revenue
	Service Revenue
	(Record recognition of revenue)

Feedback

a) Record purchase of supplies on account.
b) Record cash payment.
c) Record transfer of accounts payable to notes payable.
d) Record cash received as part of loan.
e) Record purchase of inventory on account.
f) Record cash payment.
g) Record cash received for services not yet performed.
h) Record payment of taxes to taxing authorities.
i) Completed services from part g.

2. Prepare any adjusting entries necessary at December 31, 2019.

Dec. 31	Interest Expense Correct
	Interest Payable
	(Record accrued interest)

Answer 1

a. Feb. 16	Supplies	160000
	Accounts Payable		160000
	(Record purchase of supplies on account)
b. Feb. 26	Accounts Payable	40000
	Cash		40000
	(Record partial payment of supplier)
c. Mar. 31	Accounts Payable	120000
	Notes Payable		120000
	(Record issuance of note to cover unpaid portion of account payable)
d. Apr. 30	Cash	300000
	Accounts Payable		300000
	(Record issuance of note)
e. June 4	Inventory	78000
	Accounts Payable		78000
	(Record purchase of inventory on account)
f. June 24	Accounts Payable	78000
	Cash		78000
	(Record payment of supplier)
g. Aug. 19	Cash	22000
	Unearned Service Revenue		22000
	(Record receipt of deposit for services not yet performed)
h. Oct. 15	Social Security Taxes Payable (Employee)	92500
	Social Security Taxes Payable (Employer)	92500
	Medicare Taxes Payable (Employee)	21633
	Medicare Taxes Payable (Employer)	21633
	Federal Income Taxes Withholding Payable	319000
	Cash		547266
	(Record employer payroll taxes)
i. Dec. 15	Cash	198000
	Unearned Service Revenue	22000
	Service Revenue		220000
	(Record recognition of revenue)
Dec. 31	Interest Expense	9000
	Interest Payable		9000
	(Record Interest on 10% Notes Payable for 9 Months)
Dec. 31	Interest Expense	14000
	Interest Payable		14000
	(Record Interest on 8%Notes Payable for 7 Months)