Question

In: Accounting

P10-1B On January 1, 2018, Burlington Inc.’s general ledger contained these opening balances for its liability...

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.

Solutions

Expert Solution

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

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