The general ledger of Seal-N-Ship at June 30, 2018, the end of the company’s fiscal year, includes the following account balances before payroll and adjusting entries.

Accounts Payable \( 114,000

Interest Payable 0

Salaries Payable 0

Employee Income Taxes Payable 0

FICA—OASDI Taxes Payable 0

FICA—Medicare Taxes Payable 0

Federal Unemployment Taxes Payable 0

State Unemployment Taxes Payable 0

Unearned Rent Revenue 7,200

Long-term Notes Payable 210,000

The additional data needed to develop the payroll and adjusting entries at June 30 are as follows:

a. The long-term debt is payable in annual installments of \)42,000, with the next installment due on July 31. On that date, Seal-N-Ship will also pay one year’s interest at 9%. Interest was paid on July 31 of the preceding year. Make the adjusting entry to accrue interest expense at year-end.

b. Gross unpaid salaries for the last payroll of the fiscal year were \(4,700. Assume that employee income taxes withheld are \)910 and that all earnings are subject to OASDI.

c. Record the associated employer taxes payable for the last payroll of the fiscal year, \(4,700. Assume that the earnings are not subject to unemployment compensation taxes

d. On February 1, the company collected one year’s rent of \)7,200 in advance.

Requirements

1. Using T-accounts, open the listed accounts and insert the unadjusted June 30 balances.

2. Journalize and post the June 30 payroll and adjusting entries to the accounts that you opened. Identify each adjusting entry by letter. Round to the nearest dollar.

3. Prepare the current liabilities section of the balance sheet at June 30, 2018.

Step by step solution

01

T Accounts with unadjusted balances

02

Journalizing and posting adjusting entries

03

Partial Balance Sheet (Current liabilities section)

Partial Balance Sheet
Liabilities	Amount	Assets	Amount
Current Liabilities:
Accounts Payable	$ 114,000
Interest Payable	3,780
Salaries Payable	3,790
Employee Income Tax Payable	910
FICA – OASDI Taxes Payable	298
FICA – Medicare Taxes Payable	68
Unearned Rent Revenue	4,200
Total Current Liabilities	$ 127,046
Long Term Assets
Long-term Notes Payable	$ 210,000

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