Explanation Liabilities: Liabilities are debt and obligations of a business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be Current liabilities, and Long-term liabilities. Examples: Creditors, Bills payable, Bank overdraft, Salaries and wages payable, and Notes payable. Prepare journal entry to record the liabilities transactions of Company N. Date Accounts and Explanation Post Ref Debit ($) Credit ($) 2016 February 3 Equipment 8,000 Short-term Notes Payable 8,000 (To record purchase of equipment in exchange for 6-month, 10% note) February 28 Cash (2) 25,750 Accounts Receivable (3) 51,500 Sales 75,000 Sales Tax Payable (1) 2,250 (To record the sales and sales tax) March 7 Sales Tax Payable 2,250 Cash 2,250 (To record cash payment for sales tax payable) April 30 Cash 180,000 Long-term Notes Payable 180,000 (To record cash borrowed for 11% notes payable) August 3 Short-term Notes Payable 8,000 Interest Expense (4) 400 Cash 8,400 (To record payment of maturity and interest for notes) November 30 Merchandise Inventory 6,600 Short-term Notes Payable 6,600 (To record purchase of merchandise inventory in exchange for 3-month, 8% note) December 31 Warranty Expense (5) 12,460 Estimated Warranty Payable 12,460 (To record the accrual of warranty payable) December 31 Interest Expense (6) 13,200 Interest Payable 13,200 (To record the accrual of interest payable) December 31 Interest Expense (7) 44 Interest Payable 44 (To record the accrual of interest payable) Table (1) Date Accounts and Explanation Post Ref Debit ($) Credit ($) 2017 February 28 Short-term Notes Payable 6,600 Interest Payable 44 Interest Expense (8) 88 Cash 6,732 (To record payment of maturity and interest for notes) April 30 Interest Payable 13,200 Interest Expense (9) 6,600 Cash 19,800 (To record payment of interest for notes) Table (2) On February 3, 2016, equipment is debited as it increased the asset. Short-term notes payable is credited as it increased the liability. On February 28, 2016, Cash and accounts receivable is debited as it increased the asset. Sales taxes payable is credited as it increased the liability. Sales are credited as it increases the equity value. On March 7, 2016, sales taxes payable is debited as it decreased the liability. Cash is credited as it decreased the asset. On April 30, 2016, cash is debited as it increased the asset. Long-term notes payable is credited as it increased the liability. On August 3, 2016, short-term notes payable is debited as it decreased the liability. Interest expense is debited as it decreases the equity value. Cash is credited as it decreased the asset. On November 30, 2016, Merchandise inventory is debited as it increased the asset. Short-term notes payable is credited as it increased the liability. On December 31, 2016, warranty expense is debited as it decreases the equity value. Estimated warranty payable is credited as it increased the liability. On December 31, 2016, interest expense is debited as it decreases the equity value. Interest payable is credited as it increased the liability. On February 28, 2017, short-term notes payable and interest payable is debited as it decreased the liability. Interest expense is debited as it decreases the equity value. Cash is credited as it decreased the asset. On April 30, 2017, interest payable is debited as it decreased the liability. Interest expense is debited as it decreases the equity value. Cash is credited as it decreased the asset. Working notes: Calculate sales tax payable...