Joan’s Golf Shop 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 earned gross wages of $ 230,000 for the year. From this amount, Joan deducted 22% for income taxes, 5% for Canada Pension Plan deductions, and 2% for Employment Insurance contributions before giving the cheques to her staff. As an employer, she was also required to make additional contributions of 5% for Canada Pension Plan and 2.8% for Employment Insurance. Eleven- twelfths of the amounts due to the government ( i. e., all except for the last month) were paid before the end of the year.
3. Joan gives her customers a one- year warranty on golf clubs. She estimated that warranty costs would total 2% of sales. Sales of golf clubs for the year were $ 1,100,000. During the year, she spent $ 13,000 to replace faulty golf clubs under the warranty.
4. Some customers order very expensive, custom- made golf clubs. In these cases, Joan 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 balance sheet as it would appear at the end of the year.