Question

On January 1, 2022, the ledger of Sandhill Co. contained these liability accounts.

Accounts Payable		$43,500
Sales Taxes Payable		7,600
Unearned Service Revenue		20,000

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 $5,300, which includes 6% sales taxes.
12		Performed services for customers who had made advance payments of $10,600. (Credit Service Revenue.)
14		Paid state treasurer’s department for sales taxes collected in December 2021, $7,600.
20		Sold 600 units of a new product on credit at $46 per unit, plus 6% sales tax.

During January, the company’s employees earned wages of $86,000. Withholdings related to these wages were $6,579 for Social Security (FICA), $5,207 for federal income tax, and $1,562 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.)

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.) Account Titles and Explanation Credit Debit Date 440 PM

Journalize the adjusting entries at January 31 for the outstanding note payable and for salaries and wages expense and payroll tax expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the current liabilities section of the balance sheet at January 31, 2022. Assume no change in Accounts Payable.

Answer 1

Solution Required (a): Journal entry for January transactions Credit Date Jan 1, 2022 | | Debit $18,000 Account Titles and Explanation Cash Notes Payable (To record borrowings on 4 month 5% note) $18,000 Credit Date Jan 5, 2022 Debit $5,300 Account Titles and Explanation Cash Sales Revenue ($5,300 x 100/106) Sales Taxes Payable ($5,000 x 6%) (To record sale of merchandise for cash) $5,000 $300 Date Credit Account Titles and Explanation Unearned Service Revenue Service Revenue Debit $10,600 Jan 12, 2022 $10,600 (To record service revenue from unearned service revenue for services performed) Date Credit Jan 14, 2022 Debit $7,600 Account Titles and Explanation Sales Taxes Payable Cash (To record sales taxes payment collected in December 2021 month) $7,600 Credit Date Jan 20, 2022 Debit $29,256 I Account Titles and Explanation Accounts Receivables ($46 x 600 x 106%) Sales Revenue ($46 x 600) Sales Taxes Payable ($27,600 x 6%) (To record sale of merchandise on credit) $27,600 $1,656

Required (b): Adjusting Journal entries at January 31 Debit Credit Date Jan 31, 2022 I $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 Credit Date Jan 31, 2022 I Debit | $86,000 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) $6,579 $5,207 $1,562 $72,652 Credit Date Jan 31, 2022 Debit $6,579 Account Titles and Explanation Payroll Taxes expense FICA taxes payable (To record employer's payroll taxes) $6,579 Required (c): Current liabilities section of the balance sheet at January 31, 2022 SANDHILL CO. Balance Sheet (Partial) As at January 31, 2022 Current liabilities: Accounts Payable Sales Taxes Payable ($300 + $1,656) Unearned Service Revenue ($20,000 - $10,600) Notes Payable Interest Payable FICA taxes payable Federal Income taxes payable State Income taxes payable Salaries and Wages Payable Total current liabilities $43,500 $1,956 $9,400 $18,000 $75 $13,158 $5,207 $1,562 $72,652 $165,510