On January 1, 2017, way Software Company\'s general ledger contained these liabi
ID: 2342810 • Letter: O
Question
On January 1, 2017, way Software Company's general ledger contained these liability accounts: Compan Accounts payable Unearned revenue-loyalty program CPP payable El payable HST payable Income tax payable Unearned revenue Vacation pay payable $40,000 3,700 1,320 680 8,630 3,340 15,300 8,660 In January, the following selected transactions occurred: Jan. 2 Issued a $46,000, four-month, 7% note. Interest is payable at maturity. 5 Sold merchandise for $8,600 cash, plus 13% HST. The cost of this sale was $4,100 Shumway Software uses a perpetual inventory system. rovided services for customers who had paid $8,000 cash in advance. The payment included HST of $920. Paid the Receiver General (federal government) for sales taxes collected in December 2016 14 15 Paid the Receiver General for amounts owing from the December payroll for CPP EL, and income tax. 17 Paid $14,800 to creditors on account. 20 sold 1,900 units of a new product on account for $55 per unit, plus 13% HST. This new product has a one-year warranty. It is estimated that 9% of the units sold will be returned for repair at an average cost of $10 per unit. The cost of this sale was $25 per unit. During the month, provided $2,300 of services for customers who redeemed their customer loyalty rewards. Assume that HST of $265 is included in the $2,300. Issued 30,000 loyalty rewards points worth $1 each. Based on past experience, 20% of these points are expected to be redeemed. Cash sales related to the issuance of the loyalty points were $250,000. 29 31Explanation / Answer
a. In the books of Shumway Software Company:
b. Adjusting Entries:
Date Account Titles Debit Credit $ $ Jan 2 Cash 46,000 Note Payable 46,000 Jan 5 Cash 9,718 Sales Revenue 8,600 HST Payable 1,118 Jan 5 Cost of Goods Sold 4,100 Merchandise Inventory 4,100 Jan 12 Unearned Revnue 8,000 Service Revenue 7,080 HST Payable 920 Jan 14 HST Payable 8,630 Cash 8,630 Jan 15 CPP Payable 1,320 EI Payable 680 Income Tax Payable 3,340 Cash 5,340 Jan 17 Accounts Payable 14,800 Cash 14,800 Jan 20 Accounts Receivable 118,085 Sales Revenue 104,500 HST Payable 13,585 Jan 20 Cost of Goods Sold ( 1,900 x $ 25) 47,500 Merchandise Inventory 47,500 Jan 29 Unearned Revenue : Loyalty Program 2,300 Service Revenue 2,035 HST Payable 265 Jan 31 Cash 280,000 Service Revenue 250,000 Unearned Revenue : Loyalty Payments 30,000 Jan 31 Salaries Expense 18,750 CPP Payable 764 EI Payable 343 Income Tax Payable 3,481 Cash 14,162