On January 1, 2014, the ledger of Khan Company contains the following liability accounts. Accounts Payable .........

Question:

On January 1, 2014, the ledger of Khan Company contains the following liability accounts.
Accounts Payable ......... $52,000
Sales Taxes Payable ........ 7,700
Unearned Service Revenue ..... 16,000
During January, the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $17,496, which includes 8% sales taxes.
12 Provided services for customers who had made advance payments of $10,000. (Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in December 2013 ($7,700).
20 Sold 600 units of a new product on credit at $50 per unit, plus 8% sales tax. This new product is subject to a 1-year warranty.
21 Borrowed $18,000 from Commerce Bank on a 3-month, 6%, $18,000 note.
25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Instructions
(a) Journalize the January transactions.
(b) Journalize the adjusting entries at January 31 for
(1) The outstanding notes payable,
(2) Estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product.
(c) Prepare the current liabilities section of the at January 31, 2014. Assume no change in accounts payable.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...