On January 1 2017 the ledger of Sheridan Company contained t

On January 1, 2017, the ledger of Sheridan Company contained these liability accounts. Accounts Payable $44,300 Sales Taxes Payable 7,500 Unearned Service Revenue 20,800 During January, the following selected transactions occurred. Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. 5 Sold merchandise for cash totaling $6,254, which includes 6% sales taxes. 12 Performed services for customers who had made advance payments of $12,500. (Credit Service Revenue.) 14 Paid state treasurer’s department for sales taxes collected in December 2016, $7,500. 20 Sold 680 units of a new product on credit at $53 per unit, plus 6% sales tax. During January, the company’s employees earned wages of $70,300. Withholdings related to these wages were $5,378 for Social Security (FICA), $5,021 for federal income tax, and $1,506 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31.

Solution

Date Account Debit credit Jan1 cash 18000 Note payable 18000 [Being amount borrowed against note] Jan5 cash 6254 sales revenue [6254/1.06] 5900 sales tax payable 354 jan12 Unearned service revenue 12500 service revenue 12500 jan14 Sales tax payable 7500 cash 7500 jan20 Accounts receivable 38202.4 sales revenue   [680*53] 36040 sales tax payable [36040*.06] 2162.40 jan31 Salaries and wage expense 70300 FICA Payable 5378 Federal income tax witholdings 5021 state income tax 1506 Salaries and wagepayable 58395 b Payroll tax expense 5378 FICA payable 5378 [being employer conribution for FICA recorded]