Chapter 7, Problem 61PA

Account for current liabilities. (LO 1, 5). On March 1, 2011, the accounting records of Stein Company showed the following liability accounts and balances:

Accounts payable    $21,600

Short-term notes payable    10,000

Interest payable    800

Unearned service revenue    12,500

1. a. On March 1, 2011, Stein Company signed a three-month note for $12,000 at 7.5%.
2. b. During March, Stein Company paid off the $10,000 short-term note and the interest payable shown on the March 1 balance sheet.
3. c. Stein paid off the beginning accounts payable.
4. d. During the month, Stein purchased $25,000 of merchandise on account.
5. e. Also during March, Stein’s employees earned salaries of $36,000. Withholdings related to these wages were $2,232 for social security (FICA), $3,800 for federal income tax, and $1,140 for state income tax. The company will pay March salaries and taxes withheld on April 1. No entry had been recorded for salaries or payroll tax expense as of March 31.

Requirements

1. 1. Use the accounting equation to show each of the transactions.
2. 2. Use the accounting equation to show the adjustments needed for interest on the notes payable for the month of March and for salary expense and payroll tax expense.
3. 3. Prepare the current liabilities section of the balance sheet at March 31, 2011.