On January 1, 2017. Shumway Software Company's general ledger contained these liability accounts:
Accounts payable............................540,000
Unearned revenue-loyalty program.........3,700
CPP payable.....................................1,320
El payable..........................................680
HST payable....................................8,630
Income tax payable.............................3.340
Unearned revenue.............................15.300
Vacation pay payable...........................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 58,600 cash, plus 13% HST. The cost of this sale was $4,100. Shumway Software uses a perpetual inventory system.
12 Provided services for customers who had paid $8,000 cash in advance. The payment included HST of $920.
14 Paid the Receiver General (federal government) for sales taxes collected in December 2016.
15 Paid the Receiver General for amounts owing from the December payroll for CPP, El, and income tax.
I7 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 S10 per unit. The cost of this sale was $25 per unit.
29 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.
31 Issued 30.000 loyalty rewards points worth S1 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 5250,000.
31 Recorded and paid the monthly payroll. Gross salaries were $18,750. Amounts withheld included CPP of $764, EI of $343, and income tax of $3,481.
Instructions
(a) Record the transactions.
(b) Record adjusting entries for the following:
1. Interest on the note payable
2. The estimated warranty liability
3. Employee benefits for CPP, EI, and vacation pay (accrued at a rate of 4%)
4. Estimated property taxes of $8,820 for the 2017 calendar year
(c) Prepare the current liabilities section of the balance sheet at January 31.
Taking It Further
Explain how and when the Vacation Pay Payable account balance is paid.