On January 1, 1996, the ledger of Calcutta Company contains the following liability accounts.

During January the following selected transactions occurred:
Jan. 1 Borrowed \(\$ 15,000\) in cash from Midland Bank on a 4 -month, \(10 \%, \$ 15,000\) note.
5 Sold merchandise for cash totaling \(\$ 7,800\) which includes \(4 \%\) sales taxes.
12 Provided services for customers who had made advance payments of \(\$ 8,000\). (Credit Service Revenue.)
14 Paid state treasurer's department for sales taxes collected in December \(1995 \$ 5,600\).
20 Sold 500 units of a new product on credit at \(\$ 52\) per unit, plus \(4 \%\) sales tax.
25 Sold merchandise for cash totaling \(\$ 11,440\), which includes \(4 \%\) sales taxes.
\section*{Instructions}

(a) Journalize the January transactions.

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

(c) Prepare the current liability section of the balance sheet at January 31, 1996. Assume no change in Accounts Payable.

Transcribed Image Text:

Accounts Payable Sales Taxes Payable Unearned Service Revenue $42,500 5,600 15,000