Question

Please prepare T accounts.

Question 3 Wascana Ltd. is a small wholesaler of restaurant supplies. The company's post-closing trial balance at December 31, 2017, the end of its fiscal year, is presented below: Credit 23,400 WASCANA LTD. Post-Closing Trial Balance December 31, 2017 Debit Cash $78,000 Accounts receivable 468,000 Allowance for doubtful accounts Inventory 352,000 Equipment 1,800,000 Accumulated depreciation equipment Accounts payable Interest payable Employee income tax payable CPP payable EI payable Provisions Unearned revenue Bank loan payable Common shares Retained earnings $2,698,000 480,000 289,000 3,000 57,000 26,000 10,000 34,000 13,000 900,000 59,000 803,600 $2,698,000 The company had the following transactions during January 2018. When recording these transactions, use the item number listed in lieu of the date and also use that same item number if recording a subsequent adjustment pertaining to that item. 1. 2. 3. 4. 5. 6a. 6b. 7. The bank loan bears interest at 4% and requires monthly payments on the first day of the month consisting of a fixed principal, payment of $6,000, plus interest, which was properly accrued at the end of 2017. A loan payment was made on January 1, 2018. Accrue interest on the bank loan for the month of January 2018. Early in January 2018, the company paid for a one-year insurance policy on equipment for $25,200. Equipment has a useful life of five years and is depreciated on a double-diminishing-balance basis. All of the payroll-related liabilities were paid off in early January 2018. At the end of January, salaries for that month were paid out. Gross salaries were $250,000 and amounts withheld from the employees' paycheques included the related employee income tax of $57,000, CPP of $13,000, and EI of $4,700. In addition to these amounts, the employer was required to contribute $13,000 to CPP and $6,580 to EI. The salaries were paid but no amounts were remitted to the government regarding the salaries for January. Paid a $9,000 income tax instalment.

Answer 1

1.Interest payable Dr. 3000

Loan payable Dr. 6000

Cash Cr 9000

(Being loan Installment paid for Jan 2018 with the interest @4% PA)

2. interest Dr.    2980 ((900,000-6000)*4%)/12

Interest payable Cr 2980 ((900,000-6000)*4%)/12

(Being interest payable for the loan @ 4% For the month of Jan 2018)

3. Insurance Dr. 2100 (25200/12)

Prepaid insurance Dr. 23100 (25200/12*11)

Cash Cr 25200

(Being insurance premium paid for one year , Debited the incurred Portion to expenses and balance to Prepaid Account)

4.   Depreciation Dr 44000

Accumulated Depreciation Cr 44000

(Being depreciation provided for the equipment at double decline rate for 5 Years )

Working:-

Double Depreciation rate = “1/5*100*2	40
Balance value of the asset at the beginning for the month (1800000-480000)	1320000
Depreciation for one year	528000
Depreciation for one month (528000/12)	44000

5. Employee Tax Payable Dr. 57,000

CPP Payable Dr. 26,000

EI Payable Dr. 3,000

Cash Cr. 86,000

(Being paid the opening payroll liabilities paid off for the Dec Month)

6 a)

Salary & Allowance Dr. 250,000

Employee Tax Payable Cr 57,000  

CPP Payable Cr. 13,000

EI Payable Cr. 4,700

Cash Cr. 175,300

(Being Salary & allowance paid to the employees for the month of Jan 2018 after deducting the CPP , EI and employee income tax)

6 b Salary & allowances Dr. 13,580

CPP Payable   Cr. 13,000

EI payable Cr. 580

(Employer's contribution payable  for CPP & EI for the month of January 2018)

7 Advance income Tax Dr 9000

   Cash Cr 9000

( Being paid towards the income tax installment )  

Profit & Loss A/c Dr. 312,660

4 Depreciation Cr. 44,000

2. Interest Cr. 2,980

3. Insurance Cr. 2,100

6a&b Salaries & Wages Cr. 263,580

(Being the monthly closing entry - Transfer expenses account to P& Loss account)

T ACCOUNTS

Interest Payable
1. Cash	3000	Opening balance	3000
		2 Interest	2980
Closing balance	2980
TOTAL	5980	TOTAL	5980

Bank Loan payable
1. Cash	6000	Opening balance	900000
Closing balance	894000
TOTAL	900000	TOTAL	900000

Insurance prepaid
3. Cash	23100
		Closing balance	23100
TOTAL	23100	TOTAL	23100

Accumulated depreciation
		Opening balance	480,000
		4 Depreciation	44,000
Closing balance	524,000
TOTAL	524,000	TOTAL	524,000

CPP Payable
5 Cash	26000	Opening balance	26000
		6 a) Salary & allowance	13000
		6 b) salary & allowance	13000
Closing balance	26000
TOTAL	52000	TOTAL	52000

EI Payable
5 Cash	10000	Opening balance	10000
		6 a) Salary & allowance	4700
		6 b) salary & allowance	6580
Closing balance	11280
TOTAL	21280	TOTAL	21280

Employee income Tax Payable
5 Cash	57000	Opening balance	57000
		6 a) Salary & allowance	57000
Closing balance	57000
TOTAL	114000	TOTAL	114000

Advance Tad paid
7 Cash	9000
		Closing balance	9000
TOTAL	9000	TOTAL	9000

Interest
2 Interest	2980	Profit & Loss	2980
	2980		2980

Insurance
3 cash	2100	Profit & Loss	2100
	2100		2100

Depreciation
3 Accumulated Depreciation	44000	Profit & Loss	44000
	44000		44000

Salary & allowances
6 a Cash	175300	Profit & Loss	263580
6 a CPP Payable	13000
6 a EI payable	4700
6 a Employee income tax Payable	57000
6b CPP payable	13000
6b EI payable	580
	263580		263580