Question

On January 1, 2019, the ledger of Whispering Winds Corp. contains the following liability accounts.

Accounts Payable $56,000
Sales Taxes Payable 8,800
Unearned Service Revenue 16,100

During January, the following selected transactions occurred.

Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.
12 Performed services for customers who had made advance payments of $11,500. (Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in December 2018 ($8,800).
20 Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax.
21 Borrowed $22,500 from Girard Bank on a 3-month, 8%, $22,500 note.
25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Required:
Journalize the January transactions.

Answer 1

Whispering Winds Corp.

Journal Entries:

Jan. 5 Debit Cash $20,520

Credit Sales Revenue $19,000

Credit Sales Taxes Payable $1,520

To record the sale of goods for cash, including 8% sales tax.

Jan. 12 Debit Unearned Service Revenue $11,500

Credit Service Revenue $11,500

To record service revenue earned.

Jan. 14 Debit Sales Tax Payable $8,800

Credit Cash $8,800

To record the payment of December Sales Taxes.

Ja. 20 Debit Accounts Receivable $48,600

Credit Sales Revenue $45,000

Credit Sales Taxes Payable $3,600

To record the sale of goods on credit, including sales tax of 8%.

Jan. 21 Debit Cash $22,500

Credit 8% Notes Payable (Girard Bank) $22,500

To record the borrowing of cash for a 3-month, 8%, note.

Jan. 25 Debit Cash $12,420

Credit Sales Revenue $11,500

Credit Sales Taxes Payable $920

To record the sale of goods for cash, including 8% sales tax.

Step-by-step explanation:

a) Data and Calculations:

Liability account balances:

Accounts Payable $56,000

Sales Taxes Payable 8,800

Unearned Service Revenue 16,100

Analysis of January transactions:

Jan. 5 Cash $20,520 Sales Revenue $19,000 Sales Taxes Payable $1,520

Jan. 12 Unearned Service Revenue $11,500 Service Revenue $11,500

Jan. 14 Sales Tax Payable $8,800 Cash $8,800

Ja. 20 Accounts Receivable $48,600 Sales Revenue $45,000 Sales Taxes Payable $3,600

Jan. 21 Cash $22,500 8% Notes Payable (Girard Bank) $22,500 a 3-month, 8%, note.

Jan. 25 Cash $12,420 Sales Revenue $11,500 Sales Taxes Payable $920