Reference no: EM133121585

Question - On January 1, 2020, the ledger of Chuan Kwang Luggage contains the following liability accounts (amounts in thousands).

Prepare current liability entries, adjusting entries, and current liabilities section.

Accounts Payable NT$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 NT$20,520, which includes 8% sales taxes.

Jan. 12 Performed services for customers who had made advance payments of NT$10,000. (Credit Service Revenue.)

Jan. 14 Paid revenue department for sales taxes collected in December 2019 (NT$7,700).

Jan. 20 Sold 900 units of a new product on credit at NT$50 per unit, plus 8% sales tax. This new product is subject to a 1 year warranty.

Jan. 21 Borrowed NT$27,000 from First National Bank on a 3 month, 8%, NT$27,000 note.

Jan. 25 Sold merchandise for cash totaling NT$12,420, which includes 8% sales taxes.

Required -

a. Journalize the January transactions.

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 First National Bank note.)

c. Prepare the current liabilities section of the statement of financial position at January 31, 2020. Assume no change in accounts payable.