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P2-1A On January 1, 2002, the ledger of Van Manen Company contains the following liability accounts.

During January the following selected transactions occurred.

Accounts Payable $52,000
Sales Taxes Payable 7,500
Unearned Service Revenue 16,000

Jan. 5 Sold merchandise for cash totaling $16,632, which includes 8% sales taxes.
12 Provided services for customers who had made advance payments of
$9,000. (Credit Service Revenue)
14 Paid state revenue department for sales taxes collected in December 2001
($7,500). 20 Sold 500 units of a new product on credit at $50 per unit, plus 8% sales
tax.
21 Borrowed $18,000 from Castle Bank on a 3-month, 10%, $18,000 note.
25 Sold merchandise for cash totaling $11,340, which includes 8% sales taxes.
Instructions
(a) Journalize the January transactions.
(b) Journalize the adjusting entry at January 31 for the outstanding notes payable.
(c) Prepare the current liabilities section of the balance sheet at January 31, 2002. Assume no change in accounts payable.

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Solution Summary

Assess and present the liability accounts.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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