On January 1, 2017, the ledger of Edmiston Software Company contains the following liability accounts:

Accounts Payable..................$42,500

GST Payable...........................5,800

Unearned Revenue..................15,000

During January, the following selected transactions occurred.

Jan. I Borrowed $30,000 in ash from Canada Bank on a four-month, 8%, $30,000 note.

5 Sold merchandise for cash totalling S 1 0,400, plus GST of 5% and PST 7%.

12 Provided services for customers who had made advance payments of $9,000. The payment included GST of S402 and PST of $562.

14 Paid the Province GST invoiced in December 2016 of $5,800. 20 Sold 900 units of a new product on credit at 552 per unit, plus GST of 5% and PST 7%. This new product is subject to a one-year warranty.

25 Sold merchandise for cash totalling $18,720, plus GST of 5% and PST 7%.

Instructions

(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 5% of sales of the new product.

(c) Prepare the current liabilities section of the balance sheet at January 31, 2017. Assume no change in accounts payable.

Taking It Further

James, an employee of the Edmiston Software Company, believes payroll taxes withheld are an expense to his employer. Is James correct? Explain.