Question

Exercise 10-6 Various liabilities LO2

Designer Architects had the following additional information at its November 30, 2020, year-end:

1. The Unearned Revenue account showed a balance of $69,000, which represented four months of services paid in advance by a client for services beginning on October 15, 2020.
2. The payroll register showed the following unpaid amounts as at November 30:
   

   EI* Premium	Income Taxes*	CPP*	Total Deductions	Net Payable	Office Salaries	Sales Salaries
   150.41**	1,360.00	253.98**	1,764.39	3,935.61	3,200.00	2,500.00

   
   *These values are based on assumed payroll deductions.
   **The employer's portions of EI and CPP are 1.4 times and 1 times the employees' portion, respectively.
   
3. The November utility bill in the amount of $2,860 was unpaid and unrecorded at November 30.

Required:
Prepare the appropriate entries at year-end based on the above information: (Round the final answers to 2 decimal places.)

Analysis Component:
If the above entries are not recorded on November 30, 2020, what is the effect on the income statement and the balance sheet? (Enter all value as positive values. Round intermediate and the final answers to 2 decimal places. Select "No effect" in case of no effect on Income statement and Balance sheet.)

Answer 1

Date	General Journal	Debit	Credit
Nov 30, 2020	Unearned revenue	25875.00
	Service revenue ($69000 x 1.5/4)		25875.00
	(To record the revenue earned)
Nov 30, 2020	Office salaries expense	3200.00
	Sales salaries expense	2500.00
	EI payable		150.41
	Employee Income taxes payable		1360.00
	CPP payable		253.98
	Salaries payable		3935.61
	(To record the accrued payroll)
Nov 30, 2020	Payroll taxes expense	464.55
	EI payable (1.4 x $150.41)		210.57
	CPP payable		253.98
	(To record the employer's portion of EI and CPP)
Nov 30, 2020	Utilities expense	2860.00
	Utilities payable/Accounts payable		2860.00
	(To record the accrued utilities)

Analysis Component:

Description	Effect	Amount
The income would be	Understated	16850.45
On the balance sheet liabilities would be	Overstated	16850.45
On the balance sheet equity would be	Understated	16850.45
On the balance sheet assets would be	No Effect	0

Working:

Transaction	Income Statement	Balance Sheet
		Liabilities	Equity	Assets
1	-25875	25875	-25875	NE
2	5700	-5700	5700	NE
3	464.55	-464.55	464.55	NE
4	2860	-2860	2860	NE
Total effect $	-16850.45	16850.45	-16850.45	NE

Note: Positive amounts denote overstatement and negative amounts denote understatement.