Reference no: EM132997147

Question - Joan's Golf Shop Ltd. had the following transactions involving current liabilities in its first year of operations:

1. The company ordered golf equipment from suppliers for $550,000, on credit. It paid $507,500 to suppliers during the year.

2. The shop has seven employees, who earn gross wages of $207,000 for the year. From this, the company deducted 20% for income taxes, $10,200 in CPP premiums, and $3,370 in EI premiums before distributing the cheques to the staff. As an employer, Joan was also required to match the employees' CPP premiums and pay $4,718 in EI premiums. Eleven-twelfths of the amounts due to the government (all except the last month) were paid before the end of the year.

3. The company gives customers a one-year warranty against defects on golf clubs. Management estimated that warranty costs would total 2% of sales. Sales of golf clubs for the year were $1,000,000. During the year, the company spent $13,600 on refunds under the warranty.

4. Some customers order very expensive, custom-made golf clubs. In these cases, the company requires them to pay a deposit of 50% of the selling price when the order is placed. During the year, deposits totalling $24,500 were received for custom orders. None of these orders have been delivered yet.

Required -

1. Prepare journal entries to record the transactions.

2. Prepare the current liabilities section of the statement of financial position as it would appear at the end of the year.