Question

Problem 10-1A On January 1, 2017, the ledger of Crane Company contained these liability accounts. Accounts Payable $42,700 Sales Taxes Payable 6,700 Unearned Service Revenue 19,200 During January, the following selected transactions occurred. Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. 5 Sold merchandise for cash totaling $7,314, which includes 6% sales taxes. 12 Performed services for customers who had made advance payments of $11,100. (Credit Service Revenue.) 14 Paid state treasurer’s department for sales taxes collected in December 2016, $6,700. 20 Sold 520 units of a new product on credit at $46 per unit, plus 6% sales tax. During January, the company’s employees earned wages of $79,400. Withholdings related to these wages were $6,074 for Social Security (FICA), $5,671 for federal income tax, and $1,701 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.

a) Journalize the January transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to nearest whole dollar amount, e.g. 5,275.)

b) Journalize the adjusting entries at January 31 for the outstanding note payable and for salaries and wages expense and payroll tax expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

c) Prepare the current liabilities section of the balance sheet at January 31, 2017. Assume no change in Accounts Payable.

Answer 1

1. Journal Entry
Date	Decstiption	Debit	Credit
05-Jan	Cash	7,314.00
	Sales (7314/106)		6,900.00
	Sales Tax Payable		414.00
12-Jan	Unearned Service Revenue	11,100.00
	Service Revenue		11,100.00
14-Jan	Sales Tax Payable	6700
	Cash		6700
20-Jan	Accounts Receivable	25,355
	Sales(46*520)		23,920
	Sales Tax Payable		1435.2
01-Jan	Cash	18,000
	Short term note payable		18,000

2.Closing Entries
31-Jan	Interest Expense	75
	Interest Payable		75
	(18000*5%*1/12)
31-Jan	Wages expense	79400
	Social Security		6074
	federal income Tax		5671
	State Income Tax		1701
	Wages payable		65954

Balancesheet
Current Liabilities
Notes Payable	18000
Accounts Payable	42,700
Sales Tax Payable	1849.2
(6700+414+1435.20-6700)
Interest Payable on note	75
Unearned Service Revenue	8100
(19200-11100)
Employee Benefit Payable	79400
Total Current Liabilities	1,50,124