Study Problem Three

Accounting for Current Liabilities Scenario:

Universal Manufacturing Inc. is a mid$-$sized company that produces industrial equipment. The company$$s accountant is preparing the financial statements for the year ending December $31,2024,$ and needs to properly account for various current liabilities. Below is a summary of Universal$$s current liability transactions during the year:

$1.$ Accounts Payable: Universal purchased $$75,000$ worth of raw materials on credit from suppliers. As of year$-$end, $$20,000$ remains unpaid.

$2.$ Notes Payable: On October $1,2024,$ Universal borrowed $$50,000$ from a bank by signing a $6-$ month, $8\%$ interest$-$bearing note. The principal and interest are due at maturity.

$3.$ Unearned Revenue: Universal received $$15,000$ in advance from a customer for an equipment order that will be delivered in March $2025.$

$4.$ Payroll Liabilities:

o Total salaries for December amounted to $$40,000.$ The company withheld the following amounts from employees$$ paychecks:

$$ Federal income tax: $$6,000$

$$ Social Security tax: $6\mathrm{.}2\%$ of gross salaries

$$ Medicare tax: $1\mathrm{.}45\%$ of gross salaries

o The company also must match the Social Security and Medicare taxes as an employer.

o Salaries will be paid on January $5,2025.$

$5.$ Warranty Liability: Universal provides a one$-$year warranty on all products sold. Based on historical data, the company estimates warranty costs to be $2\%$ of sales. Total sales for the year amounted to $$600,000.$

Requirements:

Part $1$: Journal Entries

Prepare the necessary journal entries to record each of the above transactions.

Part $2$: Financial Statement Presentation

$$ How would each of these liabilities be reported on Universal$$s December $31,2024,$ balance sheet?

$$ What is the total amount of current liabilities that Universal will report?