Reference no: EM132936577
Bank overdraft $18,750
Accounts payable $122,50
CPP, EI and income tax payable $6,620
Unearned revenues $12,000
During December 2020 Monmouth engaged in the following transactions:
Dec 1 Bought $20,000 of inventory on credit, terms of 30 days
Dec 2 Negotiated a $40,000 line of credit with their bank and drew-down $18,750 to replace the bank overdraft. Interest will be charged at 4%, based on the average balance outstanding during the month, and paid on the last day of the month.
Dec 7 Sold goods worth $30,000 on which they had previously received a $12,000 deposit. The balance was due in 30 days.
Dec 8 Paid $63,000 owing to a supplierDec 12Paid amounts due to federal government for the payroll amounts outstanding from November 30.
Dec 19 Sold $66,000 of goods half for cash, half on credit.
Dec 20 Made a $10,000 payment on the line of credit
Dec 21 Received $5,000 from a client for work that will be performed in January 2022
Dec 22 Received a lawyer's letter stating that a customer is suing the company for failure to clear the snow away from the front of the business premises. The customer fell and was injured as a result. Monmouth's lawyer says that it is likely that the company will be required to pay but she is unable to reasonably determine the amount of the loss.
Dec 28 Paid the monthly payroll amounts to employees.
The gross payroll was $16,200. Amounts withheld from the employees' cheques were as follows:
Canada pension plan premiums (CPP) $1,200
Employment insurance premiums (EI) $1,850
Income tax $2,800
At the same time, the company also recorded their liability for amounts due to the government for CPP and EI. Assume the employer must match the employees' contribution for both EI and CPP.
Required:
Problem 1. Prepare all the journal entries required as a result of the above transactions.
Problem 2. Prepare the current liabilities section of the balance sheet at December 31, 2020.
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