Explanation:
The journal entries are shown below:
On Jan 05
Cash $20,520
To Sales $19,000 ($20,520 ÷ 1.08)
To Sales Tax Payable $1,520 ($20,520 × 0.08 ÷ 1.08)
(Being the merchandise is sold for cash)
On Jan 12
Unearned Service Revenue $10,000
To Service Revenue $10,000
(Being the unearned service revenue is recorded)
On Jan 14
Sales Tax Payable $7,700.
To Cash $7,700
(Being the sales tax payable is recorded)
On Jan 20
Accounts Receivable $48,600
To Sales $45,000 (900 units × $50)
To Sales Tax Payable $3,600 ($45,000 × .08)
(Being sales is recorded)
On Jan 21
Cash $27,000
To Short term note payable $27,000
(Being the borrowed amount is recorded)
On Jan 25
Cash $12,420
To Sales $11,500 ($12,420 ÷ 1.08)
To Sales Tax Payable $920 ($11,500 ×.08)
(Being the merchandise sold for cash is recorded)
The closing entries are as follows
On Jan 31
Interest Expense $60
To Interest Payable $60
(Being the interest expense is recorded)
The computation is shown below:
= $27,000 × 8% ÷ 3 months ÷ 12 months
= $60
The current liabilities section is presented below:
Current liabilities section
Accounts Payable $52,000
Sales Tax Payable $6,040
Short term note payable $27,000
Interest Payable on note $60
Unearned Service Revenue $6,000
Total Current Liabilities $91,100
