On January 1, 1998, the ledger of El Paso Company contained these liability accounts:

During January the following selected transactions occurred:
Jan. 5 Sold merchandise for cash totaling \(\$ 16,632\), which includes \(8 \%\) sales taxes. 12 Provided services for customers who had made advance payments of \(\$ 9,000\). (Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in December 1997 \((\$ 7,500)\).
20 Sold 500 units of a new product on credit at \(\$ 50\) per unit, plus \(8 \%\) sales tax.
21 Borrowed \(\$ 18,000\) from Midland Bank on a 3-month, \(10 \%, \$ 18,000\) note.
25 Sold merchandise for cash totaling \(\$ 11,340\), which includes \(8 \%\) sales taxes.
\section*{Instructions}

(a) Journalize the January transactions.

(b) Journalize the adjusting entries at January 31 for the outstanding notes payable.

(c) Prepare the current liability section of the balance sheet at January 31, 1998. Assume no change in accounts payable.

Transcribed Image Text:

Accounts Payable $52,000 Sales Taxes Payable 7,500 Unearned Service Revenue 16,000