Question

EB.1 Nebula Limited is a merchant operating in the province of Manitoba, where the PST rate is 8%. Nebula uses a perpetual inventory system and the earnings approach to revenue recognition. Transactions for the business are shown below: Record purchase and sales transactions-perpetual inventory system and earnings approach- Manitoba. May 1 Paid May rent to the landlord for the rental of a warehouse. The lease calls for monthly payments of $7,300 plus 5% GST. May 3 Sold merchandise on account and shipped merchandise to Marvin Ltd. for $25,000, plus applicable sales taxes, terms n/30, FOB shipping point. This merchandise cost Nebula $18,600. May 5 Granted Marvin Ltd. a sales allowance of $800 for defective merchandise purchased on May 3. No merchandise was returned. The merchandise had cost $600. May 7 Purchased on account from Macphee Ltd. merchandise for resale for $11,000, plus applicable tax. May 12 Made a cash purchase at Home Depot of a desk for the shipping clerk. The price of the desk was $600 before applicable taxes. May 31 Paid the quarterly remittance of GST to the Receiver General. The balances in the accounts were as follows: GST Payable $7,480 and GST Recoverable $1,917. Instructions: Prepare the journal entries to record these transactions on the books of Nebula Limited.

Answer 1

Answer :

Province of Manitoba

	GENERAL JOURNAL
Date	Account Titles and Explanation	Debit	Credit
May    1	Rent Expense............................................................................................. .............................................................................................	7,300
	GST Recoverable ($7,300 × 5%)...........................................................................................	365
	Cash............................................................................		7,665
3	Accounts Receivable—Marvin.................................................................................	28,250
	Sales............................................................................		25,000
	GST Payable ($25,000 × 5%)		1,250
	PST Payable ($25,000 × 8%)		2,000
	Cost of Goods Sold.....................................................................................	18,600
	Merchandise Inventory.....................................................................		18,600
5	Sales Returns and Allowances..........................................................................	800
	GST Payable ($800 × 5%)...........................................................................................	40
	PST Payable ($800 × 8%)...........................................................................................	64
	Accounts Receivable—Marvin.........................................................................		904
7	Merchandise Inventory.............................................................................	11,000
	GST Recoverable ($11,000 × 5%)...........................................................................................	550
	Accounts Payable—Macphee......................................................................		11,550
12	Furniture ($600 × 1.08)....................................................................................	648
	GST Recoverable ($600 × 5%)...........................................................................................	30
	Cash...........................................................................		678
31	GST Payable................................................................................	7,480
	GST Recoverable.................................................................		1,917
	Cash...........................................................................		5,563