Question

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Problem 10-1A On January 1, 2017, the ledger of Sheridan Company contained these liability accounts. Accounts...

Problem 10-1A

On January 1, 2017, the ledger of Sheridan Company contained these liability accounts.

Accounts Payable		$43,200
Sales Taxes Payable		6,950
Unearned Service Revenue		19,700

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 $5,936, which includes 6% sales taxes.
12		Performed services for customers who had made advance payments of $10,300. (Credit Service Revenue.)
14		Paid state treasurer’s department for sales taxes collected in December 2016, $6,950.
20		Sold 570 units of a new product on credit at $52 per unit, plus 6% sales tax.

During January, the company’s employees earned wages of $78,800. Withholdings related to these wages were $6,028 for Social Security (FICA), $5,629 for federal income tax, and $1,689 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.

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.

Solutions

Expert Solution

a)January Transactions

1 Jan:- Cash A/c Dr . $18000

To Apex Bank A/c. $18000

5 Jan:- Cash A/c. Dr. $5936

To Sales A/c. $5600

To Sales tax payable A/c $336

12 Jan:- Unearned service revenue A/c Dr. $10300

To Service revenue A/c . $10300

14 Jan:- Sales tax payable A/c Dr. $6950

To Cash A/c $6950

20 Jan:- Debtors A/c Dr $31418.4

To Sales A/c $29640

To Sales tax payable A/c . $1778.4

b) Adjusting entries

i) Wages A/ c Dr $78800

To Employees A/c $65454

To Social security payable A/c $6028

To Federal income tax payable A/c $5629

To State income tax payable A/c $1689

ii) Interest A/c Dr. $75

To Apex bank A/c $75

c) Current Liabilities :-

Account payable $43200

Unearned service revenue $9400

Apex Bank $18000

Interest payable to Apex bank $75

Sales tax payable $2114.4

Employees $65454

Social security payable $6028

Federal income tax payable $5629

State income tax $1689

ekkarill92 answered 2 years ago

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