Question

CURRENT LIABILITIES

Sierra Limited has a December 31 year-end. On December 1stSierra had the following current liabilities listed on its book

Bank overdraft $23,250
Accounts payable 112,500
CPP and EI payable $8,620
Unearned revenues 12,000

During December Sierra incurredthe following transactions:
Dec. 1 Negotiated a $50,000 line of credit with their bank toreplace the bank overdraft. Interest will be charged at 8%, basedon the average balance outstanding during the month, and paid onthe last day of the month.
Dec. 5 Sold goods worth $30,000 on which they had previouslyreceived a $12,000 deposit. The balance was due in 30 days.
Dec.12 Bought $20,000 of inventory on credit, terms of 30days.
Dec.15 Paid amounts due the Government of Canada for the payrollamounts outstanding from November 30.
Dec. 20 Paid $87,000 owing to a supplier. Dec. 21 Received $5,000from a client for work that will be performed in January.
Dec. 21 Sold $56,000 of goods half for cash, half on credit.
Dec 22. Made a $10,000 payment on the line of credit.
Dec. 30 Paid the monthly payroll amounts to employees. The grosspayroll was $16,200. Amounts withheld from the employees’ chequeswere as follows: • Canada pension plan premiums (CPP) $1,200 •Employment insurance premiums (EI) $1,850 • Income tax $2,800 Atthis time, the company also recorded their liability for amountsdue to the government for CPP and EI. Assume the employer mustmatch the employees’ contribution for both EI and CPP.
Dec. 31 Received notification that a client has sued the companyfor failure to clear the snow away from the front of the businesspremises. Sierra’s lawyer says that it is likely that the companywill be required to pay but she is unable to reasonably determinethe amount of the loss but thinks it will not besignificant.

Required:
a. Prepare all the journal entries required as a result of theabove transactions.
b. Prepare the current liabilitysection of the statement of financial position at December31st.