PART V VARIOUS CURRENT LIABILITIES (15 points)

A) Sales Tax

Sommers Company billed its customers a total of $1,575,000 for the month of November. The total includes a 5% state sales tax.

Instructions

(a)Determine the proper amount of revenue to report for the month.

(b)Prepare the general journal entry to record the revenue and related liabilities for the month.

B) Warranties

Presley Company sells a product that includes a one-year warranty on parts and labor. During the year, 10,000 units are sold. Presley expects that 3% of the units will be defective and that the average warranty cost will be $50 per unit. Actual warranty costs incurred during the year were $14,000.

Instructions Prepare the journal entries to record (a) the estimated warranty costs and (b) the actual costs incurred.

C) Notes Payable

Prepare the necessary journal entries for the following transactions:

(a)On September 1, Lore Company borrowed $150,000 from National Bank on a 6-month, 8% note.

(b)On December 31, Lore Company accrued interest (assume adjusting entries are only made at the end of the year).