Question

On January 1, 2017, the ledger of Sheridan Company contains the following liability accounts.

Accounts Payable		$44,700
HST Payable		6,600
Unearned Revenue		13,800

During January, the following selected transactions occurred.

Jan. 2		Borrowed $23,000 from Canada Bank on a three-month, 6%, $23,000 note.
5		Sold merchandise for cash totalling $17,600 plus 13% HST.
12		Performed services for customers who had made advance payments of $8,600. The payment included HST of $990. (Credit Service Revenue.)
14		Paid Receiver General for HST invoiced in December 2016 ($6,600).
20		Sold 770 units of a new product on credit at $40 per unit, plus 13% HST.
		This new product is subject to a one-year warranty.
25		Sold merchandise for cash totalling $10,800 plus 13% HST

1. Journalize the January transactions

2. Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product sold January 20.

3. Prepare the current liabilities section of the balance sheet at January 31, 2017. Assume no change in accounts payable.

Answer 1

1.

Date	Particulars	Debit ($)	Credit ($)
2017
Jan-01	Cash	23000
	To Notes Payable		23000
Jan-05	Cash	19888
	To Sales Revenue		17600
	To HST Payable		2288
Jan-12	Accounts Receivable	8600
	To Service Revenue		8600
Jan-14	HST Payable	6600
	To Cash		6600
Jan-20	Accounts Receivable	34804
	To Sales Revenue		30800
	To HST Payable		4004
Jan-25	Cash	12204
	To Sales Revenue		10800
	To HST Payable		1404

2.

Date	Particulars	Debit ($)	Credit ($)
Jan-31	Interest	38		23000*6%*1/3/12
	To Interest Payable		38
Jan-31	Warranty Expense	2156		30800*7%
	To Warranty Payable		2156

3.

Current Liabilities section of the balance sheet at January 31, 2017
Current Liabilities		Amount ($)
Accounts Payable		44,700.00
Notes Payable		23,000.00
Interest Payable		38.00
HST Payable		7,696.00
Warranty Payable		2,156.00
Unearned Service Revenue		5,200.00
Total Current Liabilities		82,790.00