Lyrtricks Ltd., which has a December 31 year end, had the following transactions
ID: 2572768 • Letter: L
Question
Lyrtricks Ltd., which has a December 31 year end, had the following transactions in December 2016 and January 2017:
list of accounts in the enties:
2016 Dec. 1 The company borrowed $94,000 from a bank on a five-year loan payable. The terms of the loan stipulate that Lyrtricks must repay 1/5 of the principal every November 30 plus the interest accrued to that date. The loan bears interest at 9% per annum. Dec. 31 Accrued warranty expense, which is estimated at 2% of sales for the month of $153,500. Dec. 31 Recorded employee wages for December. The wages earned by employees amounted to $9,500 and the company withheld CPP of $557, EI of $499, and income taxes of $2,090. Lyrtricks’ employer contributions were $557 for CPP and $699 for EI. Dec. 31 Recorded the adjusting entry to record the interest incurred on the bank loan during December. Dec. 31 Recorded the entry to reclassify the current portion of the bank loan. 2017 Jan. 2 The company paid the wages recorded on December 31. Jan. 10 A customer returned a defective product that was still under warranty. The product was not usable and the customer requested and received a full refund in the amount of $870. Jan. 15 Made the remittance to the government related to the December 31 payroll.Prepare all necessary journal entries related to the above transactions. (Enter debit entries first followed by credit en Date Account and explanation 2016 Dec. 1 Debit Credit Dec. 31 To record warranty expense.) Dec. 31 To record wages payable.) (To record employer's liabilities.) Dec. 31 (To record interest.) (To record reclassification of current portion of bank loan.) 2017 Jan. 2 Jan. 10 Jan. 15
Explanation / Answer
Date Account Title and Explanation Debit Credit 2016 1-Dec Cash $94,000 Loan Payable $94,000 31-Dec Warranty Expense $3,070 Warranty Provision $3,070 (To record warranty expense) 31-Dec Wages Expense $9,500 Wages Payable $6,354 CPP Payable $557 EI Payable $499 Employee Income Taxes Payable $2,090 (To record wages payable) Wages Expense $1,256 CPP Payable $557 EI Payable $699 (To record employer's liabilities) 31-Dec Interest Expense $705 Interest Payable $705 (To record interest) Loan Payable $18,800 Current Portion of Long-Term Debt $18,800 (To record reclassification of current portion of bank loan) 2017 2-Jan Wages Payable $6,354 Cash $6,354 10-Jan Warranty Provision $870 Cash $870 15-Jan CPP Payable $1,114 EI Payable $1,198 Employee Income Taxes Payable $2,090 Cash $4,402
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