Question

Problem 10-01A On January 1, 2022, the ledger of Sunland Company contained these liability accounts. Accounts Payable Sales Taxes Payable Unearned Service Revenue $43,300 7,400 19,800 During January, the following selected transactions occurred. Jan. 1 5 12 14 20 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. Sold merchandise for cash totaling $5,512, which includes 6% sales taxes. Performed services for customers who had made advance payments of $11,800. (Credit Service Revenue.) Paid state treasurer's department for sales taxes collected in December 2021, $7,400. Sold 580 units of a new product on credit at $48 per unit, plus 5% sales tax. During January, the company's employees earned wages of $82,000. Withholdings related to these wages were $6,273 for Social Security (FICA), $5,057 for federal income tax, and $1,517 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31.
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Answer 1

Solution Required (a): Adjustment entry as at January 31 | Debit Credit Date Jan 31, 2022 $75 Account Titles and Explanation Interest expense ($18,000 x 5% x 1/12) Interest payable (To record the interest on outstanding notes payable) $75 Date Credit Debit $82,000 Jan 31, 2022 Account Titles and Explanation Salaries and Wages Expense FICA taxes payable Federal Income taxes payable State Income taxes payable Salaries and Wages Payable (Bal. fig.) (To record payroll and withholding taxes) $6,273 $5,057 $1,517 $69,153 Credit Date Jan 31, 2022 Debit $6,2731 Account Titles and Explanation Payroll Taxes expense FICA taxes payable (To record payroll taxes expense) $6,273 Required (b): Current liabilities section of the balance sheet at January 31, 2022 SUNLAND COMPANY Balance Sheet (Partial) As at January 31, 2022 Current liabilities: Accounts Payable Sales Taxes Payable ($312 +$1,392) Unearned Service Revenue ($ 19,800 - $11,800) Notes Payable Interest Payable FICA taxes payable Federal Income taxes payable State Income taxes payable Salaries and wages payable Total current liabilities $43,300 $1,704 $8,000 $18,000 $75 $12,546 $5,057 $1,517 $69,153 $159,352