On January 1, 2024, Zaur Company’s general ledger had these liability accounts: 

Accounts payable ....................................................... $63,700 

Unearned revenue—loyalty program ..........................2,150 

CPP payable .....................................................................2,152 

EI payable .........................................................................1,019 

HST payable .....................................................................11,390 

Income tax payable........................................................... 4,563 

Unearned revenue ............................................................16,000 

Vacation pay payable .........................................................9,120 

Warranty liability .................................................................5,750

In January, the following selected transactions occurred: 

Jan. 5 Sold merchandise for $15,800 cash, plus 13% HST. Zaur uses a periodic inventory system. 

12 Provided services for customers who had previously made advance payments of $7,000. The payment included HST of $805. 

14 Paid the Receiver General (federal government) for sales taxes invoiced in December 2023. 

15 Paid the Receiver General for amounts owing from the December payroll for CPP, EI, and income tax. 

16 Borrowed $18,000 from Second National Bank on a three-month, 6% note. Interest is payable monthly on the 15th day of the month. 

17 Paid $35,000 to creditors on account. 

20 Sold 500 units of a new product on account for $60 per unit, plus 13% HST. This new product has a two-year warranty. It is expected that 6% of the units sold will be returned for repair at an average cost of $10 per unit. 

30 Customers redeemed $1,750 of loyalty rewards in exchange for services. Assume that HST of $201 is included in this amount. 

31 Issued 50,000 loyalty points worth $1 each. Based on past experience, 10% of these points are expected to be redeemed. Cash sales related to the issuance of the loyalty points were $500,000. 

31 Determined that the company had used $875 of parts inventory in January to honour warranty contracts. 

31 Recorded and paid the monthly payroll. Gross salaries were $25,350. Amounts withheld included CPP of $1,382, EI of $400, and income tax of $4,563.  

Instructions 

a. Record the transactions. 

b. Record adjusting entries for the following: 

1. Interest on the note payable for half a month 

2. The estimated warranty liability 

3. Employee benefits, which include CPP, EI, and vacation pay that is accrued at a rate of 4% 

c. Prepare the current liabilities section of the balance sheet at January 31. 

Explain how and when the Vacation Pay Payable account balance is paid.