In: Accounting
P10-1B On January 1, 2018, Burlington Inc.’s general ledger contained these opening balances for its liability accounts:
Accounts payable |
$52,000 |
CPP payable |
3,810 |
EI payable |
1,598 |
Sales tax payable |
18,000 |
Employee income tax payable |
7,700 |
Unearned revenue |
16,000 |
The following selected transactions occurred during the month.
Jan. 5 |
Sold inventory for cash totalling $20,000, plus 5% GST and 7% PST. The cost of goods sold was $14,000. Burlington uses a perpetual inventory system. |
13 |
Paid $18,000 ($7,500 GST to the Receiver General and $10,500 PST to the provincial Minister of Finance) for sales taxes collected in December. |
14 |
Paid $13,108 to the Receiver General for amounts owing from the December payroll for the employee payroll deductions of $10,271 (CPP $1,905, EI $666, and employee income tax $7,700) and employee benefits of $2,837 (CPP $1,905 and EI $932). |
15 |
Borrowed $18,000 from HSBC Bank for three months; 6% interest is payable monthly on the 15th of each month. |
19 |
Provided services for customers who had made advance payments of $11,200. This amount includes applicable GST and PST, which is not payable until the related revenue is earned. |
22 |
Paid $32,000 to trade creditors on account. |
28 |
Received assessment of property taxes of $4,200 for the calendar year. They are payable on March 1. |
29 |
Paid employees for the month. Gross salaries totalled $40,000 and payroll deductions included CPP of $1,980, EI of $752, and employee income tax of $9,474. Employee benefits included CPP of $1,980 and EI of $1,053. |
Instructions
(a) Record the above transactions.
(b) Record any required adjusting entries at January 31.
(c) Prepare the current liabilities section of the statement of financial position at January 31.
a) Journal entries to record the transactions | |||||
Date | Particulars | Debit($) | Credit($) | ||
Jan-05 | Cash | $22,400 | |||
Sales | $20,000 | ||||
Sales tax payable - GST | $1,000 | ||||
Sales tax payable - PST | $1,400 | ||||
(being the goods costing $ 14,000 sold for $ 20,000 plus GST @ 5% and PST @ 7% on sales) | |||||
Jan-13 | Sales tax payable | $18,000 | |||
Cash | $18,000 | ||||
(being the $ 7,500 GST and $ 10,500 PST collected in December paid to the Receiver General ) | |||||
Jan-14 | CPP Payable | $3,810 | |||
EI Payable | $1,598 | ||||
Employee Income tax payable | $7,700 | ||||
Cash | $13,108 | ||||
(being $ 3,810 CPP.$ 1.598 EI and $ 7,700 Income tax payable on December payroll paid to the Receiver General) | |||||
Jan-15 | Cash | $18,000 | |||
HSBC Bank Loan | $18,000 | ||||
(being $ 18,000 borrowed from HSBC Bank for three months @ 6% interest payable monthly | |||||
Jan-19 | Unearned revenue | $11,200 | |||
Sales | $10,000 | ||||
Sales tax payable - GST | $500 | ||||
Sales tax payable - PST | $700 | ||||
(being the services provided against the unearned revenue and 5% GST & 7% PST accounted for against the gross amount received | |||||
Jan-22 | Accounts Payable | $32,000 | |||
Cash | $32,000 | ||||
(being the Trade creditors paid on account) | |||||
Jan-28 | Salaries expense | $40,000 | |||
Employee benefits - CPP | $1,980 | ||||
Employee benefits - EI | $1,053 | ||||
CPP Payable | $3,960 | ||||
EI Payable | $1,805 | ||||
Employee Income tax payable | $9,474 | ||||
Cash | $27,794 | ||||
(being the employee salaries for the month of January paid and the CPP,EI and Income Tax Payable accounted for | |||||
b) Adjustment Entry done on January 31 | |||||
Date | Particulars | Debit($) | Credit($) | ||
Jan-31 | Property Tax Expense | $350 | |||
Property Tax Payable | $350 | ||||
(being the property tax for the month of January, payable in March accrued in the books) | |||||
Jan-28 | Interest expenses | $540 | |||
Interest Payable | $540 | ||||
(being the interest payable @ 6% per month on the HSBC Bank loan for 15 days accrued in the books) | |||||
c) | |||||
Statement of financial position | |||||
Current liabilities | |||||
Particulars | Balance as on Jan-31 | ||||
Accounts Payable | $20,000 | ||||
CPP Payable | $3,960 | ||||
EI Payable | $1,805 | ||||
Sales Tax Payable | $3,600 | ||||
Employee Income Tax Payable | $9,474 | ||||
Unearned Revenue | $4,800 | ||||
HSBC Loan | $18,000 | ||||
Interest Payable | $540 | ||||
Property Tax Payable | $350 | ||||
Total Current liabilities | $62,529 | ||||
Working notes | |||||
Ending Balance = Beginning Credit Balance + Credit Transactions during | |||||
January - Debit Transactions during January | |||||
Account Title | Beginning balance | Transactions | Ending balance | ||
Debit | Credit | ||||
Accounts Payable | $52,000 | $32,000 | $20,000 | ||
CPP Payable | $3,810 | $3,810 | $3,960 | $3,960 | |
EI Payable | $1,598 | $1,598 | $1,805 | $1,805 | |
Sales Tax Payable | $18,000 | $18,000 | $3,600 | $3,600 | |
Employee Income Tax Payable | $7,700 | $7,700 | $9,474 | $9,474 | |
Unearned Revenue | $16,000 | $11,200 | $4,800 | ||
HSBC Loan | $18,000 | $18,000 | |||
Interest Payable | $540 | $540 | |||
Property Tax Payable | $350 | $350 |