Latex Paint Corporation started operations on January 1, 2016. It had the following transactions during the year.
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a. |
Jan. 1 |
Issued $20,000 share capital to the shareholders in return for cash. |
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b. |
Jan. 1 |
Obtained a bank loan totalling $30,000. The interest rate is 4%. The loan will be repaid in one year. |
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c. |
Jan. 2 |
Purchased merchandize on account from a supplier for $20,000 plus GST (5%). |
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d. |
Jan. 8 |
Sold $8,000 of paint to a customer on credit and added GST. Cost of the pain sold was $3,000. Latex uses the perpetual inventory method. |
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e. |
Jan. 15 |
Paid an employee J. Jones $1,560 cash for January 1-15 salary, calculated as follows: |
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The company’s portion of contributions is: |
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Employment insurance |
1.4 times |
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Government pension |
1 time |
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f. |
Unrecorded liabilities at January 31 include: |
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i. |
Salaries payable to J. Jones for January 16-31, amounting to $1,560 (net). Employer contributions are as shown in e. above. |
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ii. |
Corporate income taxes amounting to 20% of income before income taxes. |
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Required:
- Prepare journal entries to record the above transactions. Show necessary calculations.
- Prepare all adjusting entries needed at January 31, 2016. Show necessary calculations.
- Calculate total current liabilities at January 31, 2016.
Descriptions and general ledger account numbers are not necessary.
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