Latex Paint Corporation started operations on January 1, 2016. It had the following transactions during the year.
a. Jan 1 Issued $20,000 share capital to the shareholders in return for cash.
b. Jan 1 Obtained a bank loan totalling $30,000. The interest rate is 4%. The loan will be repaid in one year.
c. Jan. 2 Purchased merchandize on account from a supplier for $20,000 plus GST (5%).
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.
e. Unrecorded liabilities at January 31 include:
i. Salaries payable to J. Jones for January 16-31, amounting to $1,560 (net). Employer contributions are as shown in e. above.
ii. Corporate income taxes amounting to 20% of income before income taxes. Required:
1. Prepare journal entries to record the above transactions. Show necessary calculations.
2. Prepare all adjusting entries needed at January 31, 2016. Show necessary calculations.
3. Calculate total current liabilities at January 31, 2016.
Descriptions and general ledger account numbers are not necessary.
Refer to the above questions a-e.
Required:
1. Post all entries to general ledger T-accounts.
2. Prepare a classified income statement and statement of changes in equity for the month ended January 31, 2016 and a classified balance sheet at January 31. Consider salaries and benefits to be selling expenses