Reference no: EM132545036
Question - Western Supplies Ltd.'s general ledger at their July 31, 2018 year end included the following account balances before adjusting journal entries:
Note Payable, Short-Term $80,000
Accounts Payable 400,000
Current Portion of Long-Term Debt Payable
Interest Payable
Salaries Payable
Employee Withholdings Payable
Employee Payroll Costs Payable
Employee Insurance Benefits Payable
Estimated Vacation Pay Liability 8,000
GST Payable 5,000
Property Tax Payable 10,000
Unearned Service Revenue 24,000
Long-Term Debt Payable 400,000
The following information is related to selected transactions of Western Supplies Ltd. This information will be used by the company to prepare adjusting journal entries at July 31, 2018.
a. On August 31, 2017, Western Supplies Ltd. signed a 2%, 1-year, $ 80,000 note payable.
b. The $ 400,000 long-term debt was payable in annual instalments of $ 50,000, with the next instalment due March 31, 2019. On that date, Western Supplies Ltd. would also pay 1 year's interest at 4%. Interest was last paid on March 31, 2018.
c. Gross salaries for the last payroll of the fiscal year were $ 30,000. Of this amount, employee withholdings were $ 5,000, and salaries payable was $ 25,000.
d. Employer payroll costs were $ 4,000, and Western Supplies Ltd.'s liability for employee life insurance was $ 500.
e. Western Supplies Ltd. estimated that vacation pay is 5% of gross salaries, which was $ 450,000. Note that the $ 450,000 included the last payroll of the fiscal year.
f. On April 01, 2018, Western Supplies Ltd. collected 1 year's service contract revenue, paid in advance, worth $ 24,000. It will earn the revenue evenly throughout the year.
g. At July 31, 2018, Western Supplies Ltd. was the defendant in a $ 300,000 lawsuit, which Western Supplies Ltd. expected to win. However, the outcome was uncertain.
Required -
1. Open T-accounts for the listed accounts, inserting their unadjusted July 31, 2018 balances.
2. Post the July 31, 2018 adjusting journal entries to the accounts opened. Round all amounts to the nearest dollar. Use months (as opposed to actual days) in your calculations for the adjusting journal entries.
3. Prepare the liability section of Western Supplies Ltd.'s balance sheet at July 31, 2018. Show total current liabilities, long-term liabilities and total liabilities.
4. Was there a contingent liability? If yes, write a note to explain it, indicating where the note should appear.