Sararas
Corporation is a merchant and operates in the province of Ontario, where the
HST rate is 13%. Sararas uses a perpetual inventory system. Transactions for
the business for the month of March are as follows:
Mar.
1 Paid March rent to the landlord for the rental of a warehouse. The lease
calls for monthly payments of $5,500 plus 13% HST.
3
Sold merchandise on account and shipped merchandise to Marcus Ltd. for $20,000,
terms n/30, f.o.b. shipping point. This merchandise cost Sararas $11,000.
5
Granted Marcus a sales allowance of $500 (exclusive of taxes) for defective
merchandise purchased on March 3. No merchandise was returned.
7
Purchased merchandise for resale on account from Tinney Ltd. at a list price of
$14,000, plus applicable tax.
12
Made a cash purchase at Rona of a desk for the shipping clerk. The price of the
desk was $600 before applicable taxes.
31
Paid the monthly remittance of HST to the Receiver General.
Instructions
(a)
Prepare the journal entries to record these transactions on the books of
Sararas Company.
(b)
Assume instead that Sararas operates in the province of Alberta, where PST is
not applicable. Prepare the journal entries to record these transactions on the
books of Sararas.
(c)
Assume instead that Sararas operates in the province of Prince Edward Island,
where 10% PST is also charged on the 5% GST. Prepare the journal entries to
record these transactions on the books of Sararas.
(a) Province
of Ontario
|
March 1
|
Rent Expense..................
|
5,500
|
|
|
|
HST Recoverable ($5,500 X 13%)
|
715
|
|
|
|
Cash....................
|
|
6,215
|
|
|
|
|
|
|
3
|
Accounts Receivable—Marcus....
|
22,600
|
|
|
|
Sales...................
|
|
20,000
|
|
|
HST Payable
($20,000 X 13%)..........................
|
|
2,600
|
|
|
|
|
|
|
|
Cost of Goods Sold............
|
11,000
|
|
|
|
Merchandise
Inventory...
|
|
11,000
|
|
|
|
|
|
|
5
|
Sales Returns and Allowances..
|
500
|
|
|
|
HST Payable ($500 X 13%)......
|
65
|
|
|
|
Accounts
Receivable—Marcus........................
|
|
565
|
|
|
|
|
|
|
7
|
Merchandise Inventory.........
|
14,000
|
|
|
|
HST Recoverable ($14,000 X 13%)..............................
|
1,820
|
|
|
|
Accounts
Payable—Tinney..
|
|
15,820
|
|
|
|
|
|
|
12
|
Furniture.....................
|
600
|
|
|
|
HST Recoverable ($600 X 13%)..
|
78
|
|
|
|
Cash....................
|
|
678
|
|
|
|
|
|
|
31
|
HST Payable ($2,600 – $65)....
|
2,535
|
|
|
|
HST Receivable................
|
78
|
|
|
|
HST Recoverable.........
|
|
2,613
|
|
|
($715
+ $1,820 + $78)
|
|
|
(b)
Province of Alberta
|
March 1
|
Rent Expense..................
|
5,500
|
|
|
|
GST Recoverable ($5,500 X 5%).
|
275
|
|
|
|
Cash........................
|
|
5,775
|
|
|
|
|
|
|
3
|
Accounts Receivable—Marcus....
|
21,000
|
|
|
|
Sales.......................
|
|
20,000
|
|
|
GST
Payable ($20,000 X 5%)..
|
|
1,000
|
|
|
|
|
|
|
|
Cost of Goods Sold............
|
11,000
|
|
|
|
Merchandise
Inventory.......
|
|
11,000
|
|
|
|
|
|
|
5
|
Sales Returns and Allowances..
|
500
|
|
|
|
GST Payable ($500 X 5%).......
|
25
|
|
|
|
Accounts
Receivable—Marcus..
|
|
525
|
|
|
|
|
|
|
7
|
Merchandise Inventory.........
|
14,000
|
|
|
|
GST Recoverable ($14,000 X 5%)
|
700
|
|
|
|
Accounts
Payable—Tinney.....
|
|
14,700
|
|
|
|
|
|
|
12
|
Furniture.....................
|
600
|
|
|
|
GST Recoverable ($600 X 5%)...
|
30
|
|
|
|
Cash........................
|
|
630
|
|
|
|
|
|
|
31
|
GST Payable ($1,000 – $25)....
|
975
|
|
|
|
GST Receivable................
|
30
|
|
|
|
GST
Recoverable
($275
+ $700 + $30).........
|
|
1,005
|
(c) Province
of Prince Edward Island
|
March 1
|
Rent Expense..........................
|
5,500
|
|
||
|
|
GST Recoverable ($5,500 X 5%).........
|
275
|
|
||
|
|
Cash.............................
|
|
5,775
|
||
|
|
|
|
|
||
|
3
|
Accounts Receivable—Marcus............
|
23,100
|
|
||
|
|
Sales............................
|
|
20,000
|
||
|
|
GST
Payable ($20,000 X 5%).......
|
|
1,000
|
||
|
|
PST
Payable......................
|
|
2,100
|
||
|
|
[($20,000
X 1.05) X 10%]
|
|
|
||
|
|
|
|
|
||
|
|
Cost of Goods Sold....................
|
11,000
|
|
||
|
|
Merchandise
Inventory............
|
|
11,000
|
||
|
|
|
|
|
||
|
5
|
Sales Returns and Allowances..........
|
500
|
|
||
|
|
GST Payable ($500 X 5%)...............
|
25
|
|
||
|
|
PST Payable [($500 X 1.05) X 10%].....
|
53
|
|
||
|
|
Accounts
Receivab.—Marcus........
|
|
578
|
||
|
|
|
|
|
||
|
7
|
Merchandise Inventory.................
|
14,000
|
|
||
|
|
GST Recoverable ($14,000 X 5%)........
|
700
|
|
||
|
|
Accounts
Payable—Tinney..........
|
|
14,700
|
||
|
|
|
|
|
||
|
12
|
Furniture ($600 + $63*)...............
|
663
|
|
||
|
|
GST Recoverable ($600 X 5%)...........
|
30
|
|
||
|
|
Cash.............................
|
|
693
|
||
|
|
* ($600 X 1.05) X 10% = $63
|
|
|
||
|
|
|
|
|
||
|
31
|
GST Payable ($1,000 – $25)............
|
975
|
|
||
|
|
GST Receivable........................
|
30
|
|
||
|
|
GST
Recoverable
($275
+ $700 + $30)..............
|
|
1,005
|
||
