Question

On January 1, 2022, the ledger of Cullumber Company contained these liability accounts. Accounts Payable Sales Taxes Payable Unearned Service Revenue $42,800 6,900 19,300 During January, the following selected transactions occurred. Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. 5 Sold merchandise for cash totaling $5,512, which includes 6% sales taxes. 12 Performed services for customers who had made advance payments of $11,800. (Credit Service Revenue.) 14 Paid state treasurer's department for sales taxes collected in December 2021, $6,900. 20 Sold 530 units of a new product on credit at $50 per unit, plus 6% sales tax. During January, the company's employees earned wages of $72,000. Withholdings related to these wages were $5,508 for Social Security (FICA), $5,050 for federal income tax and $1,515 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. Journalize the January transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to nearest whole dollar amount, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 1 Cash 18000 Notes Payable 18000 Jan.5 Cash Sales Revenue 5182 Sales Taxes Payable 330 Jan. 12 Unearned Service Revenue 11800 Service Revenue 11800 Jan. 14 Sales Taxes Payable 6900 Cash 69006900 Jan. 20 Accounts Recevable 26500 Sales Revenue 24910 Sales Taxes Payable 1590

Answer 1

The given journal entries need to be rectified as under:

Date	Account Titles and Expalantion	Debit	Credit
Jan. 5	Cash	5512
	Sales revenue ($5512 x 100/106)		5200
	Sales tax payable		312
Jan. 20	Accounts receivable	28090
	Sales revenue (530 x $50)		26500
	Sales tax payable (6% x $26500)		1590

Adjusting entries:

Date	Account Titles and Expalantion	Debit	Credit
Jan. 31	Interest expense ($18000 x 5% x 1/12)	75
	Interest payable		75
	(To record the interest on outstanding notes payable)
Jan. 31	Wages expense	72000
	FICA Social security tax payable		5508
	Federal income tax payable		5050
	State income tax payable		1515
	Wages payable		59927
	(To record payroll and withholding taxes)
Jan. 31	Payroll tax expense	5508
	FICA Social security tax payable		5508
	(To record employer's payroll taxes)

CULLUMBER COMPANY
Balance Sheet (Partial)
At January 31, 2022
Current Liabilities:
Accounts payable	42800
Sales tax payable ($6900 + $312 - $6900 + $1590)	1902
Unearned service revenue ($19300 - $11800)	7500
Notes payable	18000
Interest payable	75
Wages payable	59927
FICA Social security tax payable ($5508 + $5508)	11016
Federal income tax payable	5050
State income tax payable	1515
Total current liabilities $	147785