Answer:
Accardo Company
1. Journalize January transactions:
Jan. 5:
Debit Cash Account with $20,520
Credit Sales with $19,000
Credit Sales Taxes Payable with $1,520
To record cash sales, including 8% sales taxes.
Jan. 12:
Debit Unearned Service Revenue with $10,270
Credit Service Revenue with $10,270
To record service revenue earned.
Jan. 14:
Debit Sales Taxes Payable with $8,010
Credit Cash Account with $8,010
To record payment of sales taxes.
Jan. 20:
Debit Accounts Receivable with $43,200
Credit Sales Account with $40,000
Credit Sales Taxes Payable with $3,200
To record sales of 800 units at $50 per unit, plus 8% sales tax.
Jan. 21:
Debit Cash Account with $24,750
Credit Notes Payable (Girard Bank) with $24,750
To record a 3-month, 8% note.
Jan. 25:
Debit Cash Account with $12,420
Credit Sales Account with $11,500
Credit Sales Taxes Payable with $920
To record cash sales, including 8% sales taxes.
2. Journalize adjusting entry for Note Payable:
Jan. 31:
Debit Interest on Note with $660
Credit Interest on Note Payable with $660
To record January interest on the note.
3. Current Liabilities Section of the Balance Sheet at January 31, 2015:
Interest on Note Payable $660
Accounts Payable - $53,140
Notes Payable $24,750
Sales Taxes Payable $5,640 ($8,010 + 1,520 -8,010 + 3,200 + 920)
Unearned Service Revenue $5,720 ($15,990 - 10,270)
Total = $89,910
Explanation:
a) The sales and taxes for January 5 transaction is calculated as follows: Sales = $20,520/1.08 = $19,000. Sales taxes of 8% on $19,000 equals $1,520.
b) Jan. 12: The Service Revenue is credited with $10,270 and the Unearned Service Revenue is debited with the same amount to recognize the performance of services and earning of revenue.
c) Sales on Jan. 20 equals $50 x 800 units, i.e. $40,000. Sales Taxes of 8% of $40,000 equals $£,200.
d) Interest on the Bank Note for January is calculated as follows: ($24,750 x 8%) / 3, which is equal to $660.
e) The sales and taxes for January 25 transaction is also calculated as follows: Sales = $12,420/1.08 = $11,500. Sales taxes of 8% on $11,500 equals $920.
