Question

The following are selected transactions of Marigold Department Store Ltd. for the current year ended December 31. Marigold is a private company operating in the province of Manitoba where PST is 8% and GST is 5%. PDSL follows ASPE and has a periodic inventory system.

1.		On February 2, Marigold placed an order to buy goods for resale from Hashmani Limited for $61,000 plus GST. Terms of purchase are f.o.b. destination, net 15. The goods arrived February 6 and the invoice was paid on February 20. (Hint: Inventory for resale is purchased PST exempt.)
2.		On April 1, Marigold purchased a truck for $61,000 from Schuler Motors Limited, paying $14,030 cash and signing a one-year, 8% note for the balance of the purchase price. Provincial sales tax of 8% and GST of 5% were charged by the supplier on the purchase price.
3.		On May 1, Marigold borrowed $69,000 from First Provincial Bank by signing a $72,900 non–interest-bearing note due one year from May 1.
4.		On June 30 and December 31, Marigold remitted cheques for $18,800 each as instalments on its current year tax liability.
5.		On August 14, Marigold's board of directors declared a $28,000 cash dividend that was payable on September 10 to shareholders of record on August 31.
6.		On December 5, Marigold received $2,000 from Jefferson Ltd. as a deposit on a trailer that Jefferson is using for an office move. The deposit is to be returned to Jefferson after it returns the trailer in good condition on January 15. (Hint: Use the account Refund Liability.)
7.		On December 10, Marigold purchased new furniture and fixtures for $6,000 on account. Provincial sales tax of 8% and GST of 5% were charged by the supplier on the purchase price.
8.		During December, cash sales of $82,000 were recorded, plus 8% provincial sales tax and 5% GST that must be remitted by the 15th day of the following month. Both taxes are levied on the sale amount to the customer. Ignore any cost of goods sold.
9.		Marigold’s lease for its store premises calls for a $3,500 monthly rental payment plus 3% of net sales. The payment is due one week after month end.
10.		Marigold was advised during the month of December that it is legally required to restore the area (considered a land improvement) surrounding one of its new store parking lots, when the store is closed in 12 years. Marigold estimates that the fair value of this obligation at December 31 is $89,000.
11.		The corporate tax return indicated taxable income of $204,800. Marigold’s income tax rate is 20%.

Prepare all the journal entries necessary to record the above transactions when they occurred and any adjusting journal entries relative to the transactions that would be required to present financial statements at December 31 in accordance with GAAP. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit Feb. 6 < Feb. 20 < Apr. 1 < > < < < >

Answer 1

1. Purchases a/c......... Dr 64050

To Hashmani Ltd 64050

(Purchased goods on credit with GST@5%)

Hashmani Ltd.........................Dr 64050

To Cash     64050

(paid cash on February 20)

2. Vehicles a/c....................Dr 68930

To Cash 14030

To payables 54900

(purchased truck with PST and GST)

3. Cash a/c.......................Dr 69000

To First provincial bank 69000

(obtained a loan from the bank)

4. Tax a/c.......................Dr 18080

To Bank 18080

(paid tax)

5.Dividend a/c.............Dr 28000

To shareholders 28000

(declared cash dividend on August 14)

Shareholders a/c..........Dr 28000

To Cash 28000

(paid dividend on September 10)

6. Cash a/c.........................Dr 20000

To account refund liability 20000

( received deposit on a condition to repay on January 15)

7. Furniture and fixtures a/c...Dr 6780

To Cash 6780

(Purchased furniture)

8.Cash a/c ...........................Dr 82000

To sales 82000

( Cash sale on December)

Tax a/c .................................Dr 10660

To Cash 10660

(Paid tax)

9. Rent a/c...............................Dr 3500

To Lessee 3500

(On becoming due for rent)   

Lessee a/c ................ ..............Dr 3500

To Cash 3500

(paid rent)

10. Land improvement a/c .........Dr 89000

To cash 89000

(Spent for land improvement)

11. Tax a.c ............................Dr 40960

To Cash 40960

( Paid tax)