Question

Question 1

Fantastic Fashions has just completed its first quarter of operations. Below are transactions that have not yet been recorded. Prepare the journal entries listed below.

      

       Jan 1     Pre-tax cash sales amounted to $75,000. HST is collected on all sales at a rate of 13%.

       Jan 15 Signed a three month note for $12,000 to extend amounts owing on account to Trendy Taste Inc. Interest is 6% annually and due at maturity.

       Mar 1     Received the annual property tax bill for $7,500 payable on June 1.

       Apr 1      Paid salaries of $10,000; of this amount $495 is CPP, $178 is EI and $3,465 is for income taxes (record the employer portion as well).

       Apr 15    Paid the note due.

       Apr 29    A customer sued Fantastic Fashions for $200,000. Legal counsel has advised that it is unlikely damages will be awarded.

       Jun 1     Paid the property taxes bill in full.

Instructions

Prepare the journal entries listed above.

Answer 1

Date	General Journal	Debit	Credit
Jan 1	Cash	$84,750
	Sales		$75,000
	HST Payable		$9,750
	(To record sale)
Jan 15	Accounts Payable	$12,000
	Notes Payable		$12,000
	(To record exchnage of notes payable)
Mar 1	Property Tax Expense	$7,500
	Property Tax Payable		$7,500
Apr 1	Salaries Expense	$10,000
	CPP deductions		$495
	EI deductions		$178
	Provincial tax deduction		$3,465
	Cash		$5,862
Apr 15	Notes Payable	$12,000
	Interest Expense	$180		($12,000 x 6% x 3/12)
	Cash		$12,180
Apr 29	No Entry
	No Entry
June 1	Property Tax Payable	$7,500
	Cash		$7,500