Question

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:

WASCANA LTD. Post-Closing Trial Balance December 31, 2017
		Debit		Credit
Cash		$73,000
Accounts receivable		450,000
Allowance for doubtful accounts				22,500
Inventory		370,000
Equipment		1,800,000
Accumulated depreciation—equipment				480,000
Accounts payable				290,000
Interest payable				5,000
Employee income tax payable				47,000
CPP payable				31,000
EI payable				12,000
Provisions				38,000
Unearned revenue				11,000
Bank loan payable				1,500,000
Common shares				63,000
Retained earnings				193,500
		$2,693,000		$2,693,000

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.		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 $10,000, plus interest, which was properly accrued at the end of 2017. A loan payment was made on January 1, 2018.
2.		Accrue interest on the bank loan for the month of January 2018.
3.		Early in January 2018, the company paid for a one-year insurance policy on equipment for $25,200.
4.		Equipment has a useful life of five years and is depreciated on a double-diminishing-balance basis.
5.		All of the payroll-related liabilities were paid off in early January 2018.
6a.		At the end of January, salaries for that month were paid out. Gross salaries were $260,000 and amounts withheld from the employees’ paycheques included the related employee income tax of $47,000, CPP of $15,500, and EI of $4,888.
6b.		In addition to these amounts, the employer was required to contribute $15,500 to CPP and $6,843 to EI. The salaries were paid but no amounts were remitted to the government regarding the salaries for January.
7.		Paid a $9,000 income tax instalment.
8.		Sales for the month of January were $747,000 and the cost of the inventory sold was $293,000. The company uses a perpetual inventory system. All sales were on credit.
9.		Accounts receivable collected during the month were $810,000.
10.		A customer owing the company $17,000 went bankrupt during January.
11.		Reviewed outstanding accounts receivable. Determined, through an aging of accounts, that doubtful accounts were $27,000 at month end.
12a.		Inventory costing $253,000 was purchased in January on credit.
12b.		Administrative expenses of $53,000 were incurred on credit.
13.		During the month of January, accounts payable amounting to $327,000 were paid.
14.		The provisions at December 31, 2017, consisted of estimated damages from a lawsuit. In January, legal counsel felt that an additional $20,000 of damages had become probable that month. Any expenses relating to these damages are recorded in administrative expenses.
15.		Unearned revenue consists of deposits from customers received in advance. No new deposits were received in January, but by the end of the month, management has estimated that unearned revenue at that time should be $8,000. Products sold to these customers that paid deposits cost 25% of the price they were sold at.
16.		The company declared and paid out dividends amounting to $5,000 in January. Record the January transactions and adjustments.

Answer 1

The journal entries are attached below. Please refer

Thanks

JOURNAL ENTRIES IN THE BOOKS OF WASCANA LTD in January Month Date/SI. NO Debit Particulars Credit 1 Bank Loan Payable $ 10,000 Interest Payable $ 5,000 To Cash 15,000 (To record payment of pricipal $10,000 and Interest accrued in previous month) Interest Calculation 2 Interest Expenses $ $1,500,000 4,967 Loan @ Dec 31-2017 $ 10,000 $ Less Paid in (1) To Interest Payable 4,967 Loan outsanding in (To record interest accrued on loan) $1,490,000 January Interest @ 4%p.a or 3 Prepaid Insurance $ 0.33%p.m on $1,490,000 25,200 4,967 25,200 To Cash | 1,490,000*4%*(1month/ 12 month) 4967 (To record payment of 12 months insurance premium) 5 Employee Income Tax Payable CPP Payable El Payable 47,000 31,000 12,000 To Cash $ 90,000 (To record payment of payroll related liabilities) 6a Salary Expenses $ 260,000 47,000 $ To Employee Income Tax Payable To CPP Payable $ 15,500 $ To El Payable To Cash (Balance in figure) 4,888 192,612 (To record salary expenses and withhold of tax, CPP, El and payment of balance to employees) 6b Employer Contribution to CPP & El Expenses То СРP Payable To El Payable (To record employer contribution payable to CPP & El fund) $ 22,343 $ 15,500 $ 6,843 s s s

7 Advance Income Tax 9,000 To Cash 9,000 (To record income tax installment paid) 8a Account Receivable 747,000 $ To Sales 747,000 (To record sale for the month) $ 8b Cost of Goods Sold 293,000 To Inventory 293,000 (To record cost of goods sold) 9 Cash $ 810,000 $ To Account Receivable 810,000 (To record receipt from debtors/ account receivable) 10 Allowances for doubtful accounts 17,000 To Account Receivable 17,000 (To record allowance for bad debts of customer who went bankrupt) 11 Bad or doubtful debts expenses $1,750,000 $ 1,750,000 To Allowances for doubtful accounts (To record doubtful accounts at month end of month) 12a Inventory $ 253,000 To Account Payable (To record purchase of inventory on credit) 12b Administrative Expenses $ 253,000 $ 53,000 To Account Payable $ 53,000 (To record admin expenses incurred on credit) 13 Account Payable To Account Payable 327,000 327,000 (To record paymentg to accounting payable in month)

14 Administrative Expenses $ 20,000 20,000 To Provisions (To record additional estimated damages from lawsuit in January month) 15 Account Receivable 8,000 To Unearned revenue $ 8,000 (To record unearned revenue from customers who paid in advance) 16a Retained Earning 5,000 To dividend payable 5,000 (To record dividend declaration) 16b Dividend payable $ 5,000 $ To Cash 5,000 (To record payment of dividend) 17 Insurance Expenses (25200 *(1 month/ 12 month)) $ 2,100 To Prepaid Expenses (To record insurance for January Month) $ 2,100 17 Depreciation Expenses (480,000/12 months) $ 40,000 To Accumulated Depreciation $ 40,000 (To record depreciation for the month)