Question

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.

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