On January 1, 2021, the ledger of Crane Company contains the following liability accounts. Accounts Payable $63,400 HST Payable 9,400 Unearned Revenue 19,500 During January, the following selected transactions occurred. Jan. 2 Borrowed $33,000 from Canada Bank on a three-month, 6%, $33,000 note. 5 Sold merchandise for cash totalling $25,000 plus 13% HST. Ignore any cost of goods sold entry. 12 Performed services for customers who had made advance payments of $12,200. The payment included HST of $1,404. (Credit Service Revenue.) 14 Paid Receiver General for HST invoiced in December 2020 ($9,400). 20 Sold 1,100 units of a new product on credit at $60 per unit, plus 13% HST. This new product is subject to a one-year warranty. 25 Sold merchandise for cash totalling $15,300 plus 13% HST. (a) Journalize the January transactions. (b) Journalize the adjusting entries at January 31 for (1) the outstanding notes payable, and (2) estimated warranty liability, assuming warranty costs are expected to equal 7% of sales of the new product sold January 20. (c) Prepare the current liabilities section of the balance sheet at January 31, 2021. Assume no change in accounts payable.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On January 1, 2021, the ledger of Crane Company contains the following liability accounts.
| Accounts Payable | $63,400 | |
| HST Payable | 9,400 | |
| Unearned Revenue | 19,500 |
During January, the following selected transactions occurred.
| Jan. 2 | Borrowed $33,000 from Canada Bank on a three-month, 6%, $33,000 note. | |
| 5 | Sold merchandise for cash totalling $25,000 plus 13% HST. Ignore any cost of goods sold entry. | |
| 12 | Performed services for customers who had made advance payments of $12,200. The payment included HST of $1,404. (Credit Service Revenue.) | |
| 14 | Paid Receiver General for HST invoiced in December 2020 ($9,400). | |
| 20 | Sold 1,100 units of a new product on credit at $60 per unit, plus 13% HST. | |
| This new product is subject to a one-year warranty. | ||
| 25 | Sold merchandise for cash totalling $15,300 plus 13% HST. |
(a)
Journalize the January transactions.
(b)
Journalize the
(c)
Prepare the current liabilities section of the balance sheet at January 31, 2021. Assume no change in accounts payable.
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