Question

Joan’s Golf Shop Ltd. had the following transactions involving current liabilities in its first year of operations:
1. The company ordered golf equipment from suppliers for $546,000, on credit. It paid $505,000 to suppliers during the year.
2. The shop has seven employees, who earn gross wages of $230,000 for the year. From this, the company deducted 22% for income taxes, $11,300 in CPP premiums, and $4,300 in EI premiums before distributing the cheques to the staff. As an employer, Joan was also required to match the employees’ CPP premiums and pay $6,020 in EI premiums. Eleven-twelfths of the amounts due to the government (all except the last month) were paid before the end of the year.
3. The company gives customers a one-year warranty on golf clubs. Management estimated that warranty costs would total 2% of sales. Sales of golf clubs for the year were $1.1 million. During the year, the company spent $13,000 to replace faulty golf clubs under the warranty.
4. Some customers order very expensive, custom-made golf clubs. In these cases, the company requires them to pay a deposit of 50% of the selling price when the order is placed. During the year, deposits totalling $20,000 were received for custom orders. None of these orders have been delivered yet.
Required:
a. Prepare journal entries to record the transactions.
b. Prepare the current liabilities section of the statement of financial position as it would appear at the end of the year.


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  • CreatedJune 11, 2015
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