Question

The following are selected transactions of Grouper Department Store Ltd. for the current year ended December 31. Grouper 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.

2.On April 1, Grouper purchased a truck for $56,000 from Schuler Motors Limited, paying $12,880 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, Grouper borrowed $75,000 from First Provincial Bank by signing a $80,100 non–interest-bearing note due one year from May 1.

4.On June 30 and December 31, Grouper remitted cheques for $18,800 each as instalments on its current year tax liability.

5.On August 14, Grouper's board of directors declared a $13,000 cash dividend that was payable on September 10 to shareholders of record on August 31.

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.

Answer 1

Part 2 ( Purchase of truck )

Date : 1st April

	Dr	Cr
Truck ( 56000*1.13)	60,480
To Cash		12,880
To Notes payable-8%		50,400
( being truck purchased accounted )

Since it is capital item GST credit is not available, so entire tax ( PST@8% and GST@5% ) is capitalised.

Date : 31st December

	Dr	Cr
Interest ( 50400*8%*(9/12) )	3,024
To Notes payable-8%		3,024
( being interest from April to Dec at 8% accounted )

Part 3 ( Loan taken from Bank )

Date- 1st May

	Dr	Cr
Bank	75,000
To Loan from Bank		75,000
(being loan from First Provincial Bank by signing a $80,100 Non-interest bearing note )

Date : 31st December

	Dr	Cr
Interest (80100-75000)*(8/12)	3,400
To Loan from Bank		3,400
( being interest from May to Dec accounted )

Part 4

Date : 30th June and 31st Dec - pass this enrtry on both days

	Dr	Cr
Tax Expense	18,800
To Bank		18,800
(being payment of tax instalment for current year is accounted )

Part 5 ( Dividend )

Date - 31st August

	Dr	Cr
Dividend	13,000
To Dividend Payable		13,000
(being dividend payable is accounted )

Date - 10th September

	Dr	Cr
Dividend Payable	13,000
To Cash		13,000
(being dividend payment in cash accounted )