On January 1, 2012. the ledger of Montoya Company contains the following liabili

Question

On January 1, 2012. the ledger of Montoya Company contains the following liability During January, the following selected transactions occurred. Sold merchandise for cash totaling $22,680, which includes 8% sales taxes. Provided services for customers who had made advance payments of $10,000 (Credit Service Revenue.) Paid state revenue department for sales taxes collected in December 2011 ($7,700). Sold 800 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. Borrowed $18.000 from DeKalb Bank on a 3-month, 8%, $18,000 note. Sold merchandise for cash totaling $12,420, which includes 8% sales taxes. Instructions Journalize the January transactions. Joumalize the adjusting entries al 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.

Explanation / Answer

Ans 1 5-Jan Account head & Details Debit Credit Cash 22,680.00 Sales 22,064.00 Sales Tax Payable 616 12-Jan Unearned Service Revenue 10,000.00 Service Revenue 10,000.00 14-Jan Sales Tax Payable     7,700.00 Cash     7,700.00 20-Jan Accounts Receivable 48,600.00 Sales 45,000.00 Sales Tax Payable     3,600.00 21-Jan Cash 27,000.00 Short term note payable 27,000.00 25-Jan Cash 12,420.00 Sales 11,500.00 Sales Tax Payable        920.00 Ans 2 Closing Entries 31-Jan Interest Expense           60.00 Interest Payable           60.00 Ans b Current Liabilities Accounts Payable 52,000.00 Sales Tax Payable     6,040.00 Short term note payable 27,000.00 Interest Payable on note           60.00 Unearned Service Revenue     6,000.00 Total Current Liabilities 91,100.00

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