Question

P10-1B On January 1, 2018, Burlington Inc.'s general ledger contained these opening balances for its liability accounts: Accounts payable $52,000 CPP payable 3,810 El payable 1,598 Sales tax payable 18,000 Employee income tax payable 7,700 Unearned revenue 16,000 The following selected transactions occurred during the month. Jan. 5 Sold inventory for cash totalling $20,000, plus 5% GST and 7% PST. The cost of goods sold was $14,000. Burlington uses a perpetual inventory system. 13 Paid $18,000 ($7,500 GST to the Receiver General and $10,500 PST to the provincial Minister of Finance) for sales taxes collected in December. 14 Paid $13,108 to the Receiver General for amounts owing from the December payroll for the employee payroll deductions of $10,271 (CPP $1,905, EI $666, and employee income tax $7,700) and employee benefits of $2,837 (CPP $1,905 and EI $932). 15 Borrowed $18,000 from HSBC Bank for three months; 6% interest is payable monthly on the 15th of each month. 19 Provided services for customers who had made advance payments of $11,200. This amount includes applicable GST and PST, which is not payable until the related revenue is earned. 22 Paid $32,000 to trade creditors on account. 28 Received assessment of property taxes of $4,200 for the calendar year. They are payable on March 1. 29 Paid employees for the month. Gross salaries totalled $40,000 and payroll deductions included CPP of $1,980, EI of $752, and employee income tax of $9,474. Employee benefits included CPP of $1,980 and EI of $1,053. Instructions (a) Record the above transactions. (b) Record any required adjusting entries at January 31. (c) Prepare the current liabilities section of the statement of financial position at January 31.

Answer 1

(a) Journal entries to record the transactions
Date	Account Title and Explanation	Debit	Credit
Jan-5	Cash	$22,400
	Sales		$20,000
	Sales tax payable - GST		$1,000
	Sales tax payable - PST		$1,400
	(being the goods costing $ 14,000 sold for $ 20,000 plus GST @ 5% and PST @ 7% on sales
Jan-13	Sales tax payable	$18,000
	Cash		$18,000
	(being the $ 7,500 GST and $ 10,500 PST collected in December paid to the Receiver General )
Jan-14	CPP Payable	$3,810
	EI Payable	$1,598
	Employee Income tax payable	$7,700
	Cash		$13,108
	(being $ 3,810 CPP.$ 1.598 EI and $ 7,700 Income tax payable on December payroll paid to the Receiver General
Jan-15	Cash	$18,000
	HSBC Bank Loan		$18,000
	(being $ 18,000 borrowed from HSBC Bank for three months @ 6% interest payable monthly
Jan-19	Unearned revenue	$11,200
	Sales		$10,000
	Sales tax payable - GST		$500
	Sales tax payable - PST		$700
	(being the services provided against the unearned revenue and 5% GST & 7% PST accounted for against the gross amount received
Jan-22	Accounts Payable	$32,000
	Cash		$32,000
	(being the Trade creditors paid on account)
Jan-28	Salaries expense	$40,000
	Employee benefits - CPP	$1,980
	Employee benefits - EI	$1,053
	CPP Payable		$3,960
	EI Payable		$1,805
	Employee Income tax payable		$9,474
	Cash		$27,794
	(being the employee salaries for the month of January paid and the CPP,EI and Income Tax Payable accounted for
(b) Adjustment Entry done on January 31
Date	Account Title and Explanation	Debit	Credit
Jan-31	Property Tax Expense	$350
	Property Tax Payable		$350
	(being the property tax for the month of January, payable in March accrued in the books)
Jan-28	Interest expenses	$540
	Interest Payable		$540
	(being the interest payable @ 6% per month on the HSBC Bank loan for 15 days accrued in the books)
('c)
Statement of financial position
Current liabilities
	Account Title		Balance as on Jan 31
	Accounts Payable		$20,000
	CPP Payable		$3,960
	EI Payable		$1,805
	Sales Tax Payable		$3,600
	Employee Income Tax Payable		$9,474
	Unearned Revenue		$4,800
	HSBC Loan		$18,000
	Interest Payable		$540
	Property Tax Payable		$350
	Total Current liabilities		$62,529

Working notes
Ending Balance = Beginning Credit Balance + Credit Transactions during January - Debit Transactions during January
	Account Title	Beginning Balance	Transactions		Ending Balance
			Debit	Credit
	Accounts Payable	$52,000	$32,000		$20,000
	CPP Payable	$3,810	$3,810	$3,960	$3,960
	EI Payable	$1,598	$1,598	$1,805	$1,805
	Sales Tax Payable	$18,000	$18,000	$3,600	$3,600
	Employee Income Tax Payable	$7,700	$7,700	$9,474	$9,474
	Unearned Revenue	$16,000	$11,200		$4,800
	HSBC Loan			$18,000	$18,000
	Interest Payable			$540	$540
	Property Tax Payable			$350	$350