Question

On January 1, 2015, the ledger of Accardo Company contains the following liability accounts.

Accounts Payable		$55,480
Sales Taxes Payable		8,180
Unearned Service Revenue		15,920

During January, the following selected transactions occurred.

Jan. 5		Sold merchandise for cash totaling $19,548, which includes 8% sales taxes.
12		Performed services for customers who had made advance payments of $10,270. (Credit Service Revenue.)
14		Paid state revenue department for sales taxes collected in December 2014 ($8,180).
20		Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax.
21		Borrowed $22,500 from Girard Bank on a 3-month, 8%, $22,500 note.
25		Sold merchandise for cash totaling $12,312, which includes 8% sales taxes.

1)Journalize the January transactions.

2) Journalize the adjusting entries at January 31 for the outstanding notes payable. (Hint: Use one-third of a month for the Girard Bank note.)

3) Prepare the current liabilities section of the balance sheet at January 31, 2015. Assume no change in accounts payable.

Answer 1

1) Journal Entries

Date	Particulars	Dr. Amt. (in $)	Cr. Amt. (in $)
Jan-05	Cash A/c                                                       Dr	19,548
	To Revenue A/c		18,100
	To Sales tax payable A/c		1,448
	Being merchandise sold for cash.
Jan-12	Unearned service revenue A/c           Dr	10,270
	To Revenue A/c		10,270
	Being service performed.
Jan-14	Sales tax payable A/c                              Dr	8,180
	To Bank A/c		8,180
	Being sales tax paid
Jan-20	Accounts receivable A/c                        Dr	48,600
	To Revenue A/c		45,000
	To Sales tax payable A/c		3,600
	Being new product sold on credit.
Jan-21	Bank A/c                                                        Dr	22,500
	To Loan from Girard bank A/c		22,500
	Being money borrowed for 3 months.
Jan-25	Cash A/c                                                       Dr	12,312
	To Revenue A/c		11,400
	To Sales tax payable A/c		912
	Being merchandise sold for cash.

2. Adjusted Journal Entries

Date	Particulars	Dr. Amt. (in $)	Cr. Amt. (in $)
Jan-31	Interest A/c                                                  Dr	150
	To Interest payable A/c		150
	Being interest due on notes payable.

3. Calculation of Current Liabilities

Particulars	Opening Bal.	Addition	Payment	Closing Bal.
Accounts Payable	55,480	-	-	55,480
Sales tax payable	8,180	5,960	-8,180	5,960
Unearned Service Revenue	15,920	-	-10,270	5,650
Total				67,090