Problem 10-1A (Part Level Submission) On January 1, 2017, the ledger of Accardo Company contains the following liability accounts. Accounts Payable $52,000 Sales Taxes Payable 7,700 Unearned Service Revenue 16,000 During January, the following selected transactions occurred. Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes. 12 Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2016 ($7,700). 20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Question

Inchworm

Business

18 June, 14:24

Problem 10-1A (Part Level Submission) On January 1, 2017, the ledger of Accardo Company contains the following liability accounts. Accounts Payable $52,000 Sales Taxes Payable 7,700 Unearned Service Revenue 16,000 During January, the following selected transactions occurred. Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes. 12 Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.) 14 Paid state revenue department for sales taxes collected in December 2016 ($7,700). 20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. 21 Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

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Answers (1)

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Jamir Holloway · Answer 1

The journal entries are shown below:

On Jan 05

Cash $20,520

To Sales $19,000 ($20,520 : 1.08)

To Sales Tax Payable $1,520 ($20,520 * 0.08 : 1.08)

(Being the merchandise is sold for cash)

On Jan 12

Unearned Service Revenue $10,000

To Service Revenue $10,000

(Being the unearned service revenue is recorded)

On Jan 14

Sales Tax Payable $7,700.

To Cash $7,700

(Being the sales tax payable is recorded)

On Jan 20

Accounts Receivable $48,600

To Sales $45,000 (900 units * $50)

To Sales Tax Payable $3,600 ($45,000 *.08)

(Being sales is recorded)

On Jan 21

Cash $27,000

To Short term note payable $27,000

(Being the borrowed amount is recorded)

On Jan 25

Cash $12,420

To Sales $11,500 ($12,420 : 1.08)

To Sales Tax Payable $920 ($11,500 *.08)

(Being the merchandise sold for cash is recorded)

The closing entries are as follows

On Jan 31

Interest Expense $60

To Interest Payable $60

(Being the interest expense is recorded)

The computation is shown below:

= $27,000 * 8% : 3 months : 12 months

= $60

The current liabilities section is presented below:

Current liabilities section

Accounts Payable $52,000

Sales Tax Payable $6,040

Short term note payable $27,000

Interest Payable on note $60

Unearned Service Revenue $6,000

Total Current Liabilities $91,100