Recording and ReportingCurrent Liabilities

The following is a list of liability accounts on the ledger of Chop House Incorporated on January 1:

Sales Tax Payable $7500

Accounts Payable $9500

Unearned Service Revenue $16500

The following transactions occurred during the month of January:

Jan. 1 Borrowed $25000 from Atlanta Bank on a 6-month, 6% note

9 Provided service for customers who had paid $6000 in advance

15 Paid state treasurer for sales taxes collected in December, $7500

18 Bought inventory on credit for $12000

23 Sold goods on credit for $3000, plus 7% sales tax

The employees of the Chop House earned gross salaries of $45,000 during January. Withholdings were $2,500 for Social Security, $4,000 for federal income tax, and $1,900 for state income tax. The employer share of FICA taxes was also $2,500. Salaries earned in January will be paid during February.

Required:

a.Prepare journal entries for the January transactions. Assume that purchases are recorded directly into the inventory account. For compound entries, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

b.Prepare adjusting entries at January 31 related to salaries, payroll taxes, andnotes payable. For compound entries, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

c.Create the current liability section of the balance sheet at January 31.

Chop House

Current Liabilities Section

January 31

Accounts Payable

$

Notes Payable

Federal Tax Withholdings Payable

FICA Taxes Payable

Interest Payable

Salaries Payable

Sales Tax Payable

State Tax Withholdings Payable

Unearned Revenue

Total Current Liabilities

$