Chapter 10, Problem 10.1BP

a)

To determine

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Sales tax payable

The Company collects the tax from the customer when the sale is made on cash or on account, and periodically pays the collections to the state’s department of revenue. Many states are implementing sales taxes on purchases made on the internet also. Sales taxes are stated as percentage of the sales price.

Unearned revenue

It is an advance made by the buyer before receiving the product or service. In upcoming period seller will have an obligation to provide goods or perform the services to the buyer for the payment already received. It is a current liability until the goods are delivered or the service is performed.

Current liability

Current liability is an obligation that the companies need to pay from the remaining current assets or creation of other current liabilities within a fiscal year or the operating cycle whichever is higher.

To prepare: The journal entry to record the transactions of January.

(b)

To determine

To prepare: The adjusting entry as at January 31 for the outstanding note payable.

(c)

To determine

To prepare: The current liabilities section of the balance sheet for Company W, on January 31, 2015.