Reference no: EM132555194
On January 1, 2017, the ledger of Riccardo 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.
Jan. 12 Performed services for customers who had made advance payments of $10,000. Jan. 14 Paid state revenue department for sales taxes collected in December 2016 ($7,700).
Jan. 20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1-year warranty.
Jan. 21 Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note.
Jan. 25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.
Instructions
Question (a) Journalize the January transactions.
Question (b) Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product. (Hint: Use one-third of a month for the Girard Bank note.)
Question (c) Prepare the current liabilities section of the balance sheet at January 31, 2017. Assume no change in accounts payable.
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