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Riverbed Corp operates in the province of Ontario and sells merchandise on which HST must be charged at a rate of 13%. R...

Riverbed Corp operates in the province of Ontario and sells merchandise on which HST must be charged at a rate of 13%. Riverbed uses a perpetual inventory system and has a calendar year end.
Transactions for the business for the month of March are shown below:

Mar. 1 Received an order from Franz Madolf for a specialty item not in stock. Due to the cost and nature of the item, Riverbed required Madolf to pay $900 in advance of the sale.
4 Received $900 cash from Madolf toward the order placed on March 1.
5 Sold merchandise on account and shipped merchandise to Marin Inc. for $29,000, plus HST terms n/30, FOB shipping point. This merchandise cost Stratton $10,900.
7 Granted Marin a sales allowance of $1,000 (plus related taxes) for defective merchandise purchased on March 5. No merchandise was returned.
30 Collected amount owing from Marin.

1) Prepare the journal entries to record the March transactions of Riverbed Corp.

2) Repeat part (a) assuming that Riverbed now operates in the province of Manitoba where PST is charged at the rate of 8% and GST is at the rate of 5%. Also assume that Riverbed has a perpetual inventory system.

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Answer #1

SOLUTION

1.

Date Accounts titles and Explanation Debit ($) Credit ($)
Mar.1 No entry required
Mar.4 Cash 900
Unearned Revenue 900
Mar.5 Accounts Receivable 32,770
  Sales Revenue 29,000
  HST Payable (29,000*13%) 3,770
Cost of Goods Sold 10,900
Merchandise Inventory 10,900
Mar.7 Sales Returns and Allowances 1,130
  Accounts Receivable [1,000+(1,000*13%)] 1,130
Mar.30 Cash 31,640
Accounts Receivable (32,770-1,130) 31,640

2.

Date Accounts titles and Explanation Debit ($) Credit ($)
Mar.1 No entry required
Mar.4 Cash 900
Unearned Revenue 900
Mar.5 Accounts Receivable 32,770
  Sales Revenue 29,000
GST Payable (29,000*5%) 1,450
PST Payable (29,000*8%) 2,320
Cost of Goods Sold 10,900
Merchandise Inventory 10,900
Mar.7 Sales Returns and Allowances 1,130
  Accounts Receivable [1,000+(1,000*13%)] 1,130
Mar.30 Cash 31,640
Accounts Receivable (32,770-1,130) 31,640
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