,TESTBANK for Accounting Principles 9e Canadian Volume 2 Weygandt
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, APPENDIX B: SALES TAXES
EXERCISES
Exercise 1
For the following provinces: New Brunswick, Newfoundland, Alberta, British Columbia, Yukon,
identify which sales tax or taxes they charge.
Solution 1
New Brunswick HST
Newfoundland HST
Alberta GST
British Columbia GST and PST
Yukon GST
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 2
For the following provinces: Nunavut, Manitoba, Ontario, Prince Edward Island, Saskatchewan,
identify which sales tax or taxes they charge.
Solution 2
Nunavut GST
Manitoba GST and PST
Ontario HST
Prince Edward Island HST
Saskatchewan GST and PST
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 3
Identify the three types of sales taxes and to whom the remittance must be made.
Solution 3
There are three types of sales taxes:
1) Goods and services tax (GST)
2) Provincial sales tax (PST)
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prohibited.
,Test Bank for Accounting Principles, Ninth Canadian Edition
3) Harmonized sales tax (HST)
GST and HST are remitted to the Receiver General for Canada, which is the collection agent for
the federal government (and in the case of HST also the provincial government). PST is
remitted to the Minister of Finance in the applicable province.
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 4
Here is a list of some typical goods and services:
Office supplies
Ready-to-eat pizza
One dozen doughnuts
Prescription drugs
Uncooked pizza
Municipal water
Instructions
For each item on the list, identify its GST/HST tax status as taxable, zero-rated, or exempt.
Solution 4
Office supplies – taxable
Ready-to-eat pizza – taxable
One dozen doughnuts – zero-rated
Prescription drugs – zero-rated
Uncooked pizza – zero-rated
Municipal water – exempt
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 5
Here is a list of some typical goods and services:
Banking services
Dental services
Building materials
Uncooked pizza
Prescription drugs
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,Test Bank for Accounting Principles, Ninth Canadian Edition
Instructions
For each item on the list, identify its GST/HST tax status as taxable, zero-rated, or exempt.
Solution 5
Banking services – exempt
Dental services – exempt
Building materials – taxable
Uncooked pizza – zero-rated
Prescription drugs – zero-rated
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 6
Maine Event is a new salon located in Winnipeg, Manitoba. The following information relates to
transactions that took place in June. Maine Event uses a perpetual inventory system and uses
the earnings approach for revenue recognition.
June 3 In the salon, $500 worth of hair services were performed for cash. These services
are subject to PST of 7% and GST.
4 A sale of $100 worth of products is made on account to James Zing. The cost of
the product to Maine was $85.
10 James Zing returned $25 worth of product. This product had a cost of $15 and was
returned to goods for resale.
30 James Zing paid his outstanding balance.
Instructions
Prepare the journal entries to record these transactions. .
Solution 6
June 3 Cash...................................................................................... 560
Service Revenue............................................................ 500
PST Payable ($500 x 7%).............................................. 35
GST Payable ($500 x 5%).............................................. 25
4 Accounts Receivable............................................................. 112
Sales............................................................................... 100
PST Payable ($100 x 7%).............................................. 7
GST Payable ($100 x 5%).............................................. 5
Cost of Goods Sold ............................................................... 85
Merchandise Inventory................................................... 85
10 Sales Returns and Allowances.............................................. 25.00
PST Payable ($25 x 7%)....................................................... 1.75
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,Test Bank for Accounting Principles, Ninth Canadian Edition
GST Payable ($25 x 5%)....................................................... 1.25
Accounts Receivable...................................................... 28.00
Merchandise Inventory.......................................................... 15
Cost of Goods Sold ........................................................ 15
30 Cash ($112.00 – $28.00)....................................................... 84
Accounts Receivable...................................................... 84
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 7
The following information relates to transactions that took place in April for Trip n Trail Inc. Trip n
Trail is located in Trail, BC, uses a perpetual inventory system, and uses the earnings approach
for revenue recognition.
Apr. 2 In the shop, a total of $1,500 worth of backpack repair services were performed for
cash. These services are subject to PST of 7% and GST.
6 Sales of $12,000 worth of camping-related merchandise were made on account to
Trips R Us. The cost of the products to Trip was $8,500.
12 A return of $2,500 worth of products received from Trips R Us as they ordered an
incorrect pack size. This product had a cost of $1,500 and was returned to goods
available for sale.
30 Trips R Us settles their outstanding balance.
Instructions
Prepare the journal entries to record these transactions.
Solution 7
Apr. 2 Cash...................................................................................... 1,680
Service Revenue............................................................ 1,500
PST Payable ($1,500 x 7%)........................................... 105
GST Payable ($1,500 x 5%)........................................... 75
6 Accounts Receivable............................................................. 13,440
Sales............................................................................... 12,000
PST Payable ($12,000 x 7%)......................................... 840
GST Payable ($12,000 x 5%)......................................... 600
Cost of Goods Sold ............................................................... 8,500
Merchandise Inventory................................................... 8,500
12 Sales Returns and Allowances.............................................. 2,500
PST Payable ($2,500 x 7%).................................................. 175
GST Payable ($2,500 x 5%).................................................. 125
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,Test Bank for Accounting Principles, Ninth Canadian Edition
Accounts Receivable...................................................... 2,800
Merchandise Inventory.......................................................... 1,500
Cost of Goods Sold ........................................................ 1,500
30 Cash ($13,440 – $2,800)....................................................... 10,640
Accounts Receivable...................................................... 10,640
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 8
Maine Event is a new salon located in Saint John, New Brunswick. The following information
relates to transactions that took place in June. Maine Event uses a perpetual inventory system
and uses the earnings approach for revenue recognition.
June 3 In the salon, $500 worth of hair services were performed for cash. These services
are subject to HST of 15%.
4 A sale of $100 worth of products is made on account to James Zing. The cost of
the product to Maine was $85.
10 James Zing returned $25 worth of product. This product had a cost of $15 and was
returned to goods available for sale.
30 James Zing paid his outstanding balance.
Instructions
Prepare the journal entries to record these transactions. .
Solution 8
June 3 Cash...................................................................................... 575
Service Revenue............................................................ 500
HST Payable ($500 x 15%)............................................ 75
4 Accounts Receivable............................................................. 115
Sales............................................................................... 100
HST Payable ($100 x 15%)............................................ 15
Cost of Goods Sold ............................................................... 85
Merchandise Inventory................................................... 85
10 Sales Returns and Allowances.............................................. 25.00
HST Payable ($25 x 15%)..................................................... 3.75
Accounts Receivable...................................................... 28.75
Merchandise Inventory.......................................................... 15
Cost of Goods Sold ........................................................ 15
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,Test Bank for Accounting Principles, Ninth Canadian Edition
30 Cash ($115.00 – $28.75)....................................................... 86.25
Accounts Receivable...................................................... 86.25
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 9
The following information relates to transactions that took place in April for Trip n Trail Inc. Trip n
Trail is located in Fort Erie, Ontario, uses a perpetual inventory system, and uses the earnings
approach for revenue recognition.
April 2 In the shop a total of $1,500 worth of backpack repair services were performed for
cash. These services are subject to HST of 13%.
6 Sales of $12,000 worth of camping-related merchandise were made on account to
Trips R Us. The cost of the products to Trip was $8,500.
12 A return of $2,500 worth of products received from Trips R Us as they ordered an
incorrect pack size. This product had a cost of $1,500 and was returned to goods
available for sale.
30 Trips R Us settles their outstanding balance.
Instructions
Prepare the journal entries to record these transactions.
Solution 9
Apr. 2 Cash...................................................................................... 1,695
Service Revenue............................................................ 1,500
HST Payable ($1500 x 13%).......................................... 195
6 Accounts Receivable............................................................. 13,560
Sales............................................................................... 12,000
HST Payable ($12,000 x 13%)....................................... 1,560
Cost of Goods Sold ............................................................... 8,500
Merchandise Inventory................................................... 8,500
12 Sales Returns and Allowances.............................................. 2500
HST Payable ($2,500 x 13%)................................................ 325
Accounts Receivable...................................................... 2,825
Merchandise Inventory.......................................................... 1,500
Cost of Goods Sold ........................................................ 1,500
30 Cash ($13,560 – $2,825)....................................................... 10,735
Accounts Receivable...................................................... 10,735
Bloomcode: Application
Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
,Test Bank for Accounting Principles, Ninth Canadian Edition
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 10
Great Green Landscaping sells lawn maintenance equipment. They use a perpetual inventory
system and their operations are located in Manitoba. The Manitoba PST rate is 7%. The
following transactions took place in May:
May 6 Purchased 350 trimmers for resale at $100 each before taxes from Trim It with
.............................. terms 2/10, net 30, FOB shipping point.
16 Returned two of the trimmers as they were defective.
22 Picked up $250 worth of supplies to be used in the sales office and paid with cash.
31 Purchased two desks to be used in the sales office on account for $450, plus
applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 10
May 6 Merchandise Inventory (350 × $100)..................................... 35,000
GST Recoverable ($35,000 × 5%) ........................................ 1,750
Accounts Payable........................................................... 36,750
16 Accounts Payable.................................................................. 210
GST Recoverable ($200 x 5%)....................................... 10
Merchandise Inventory................................................... 200
22 Supplies ($250 + $17.50 PST) .............................................. 267.50
GST Recoverable ($250 x 5%).............................................. 12.50
Cash............................................................................... 280.00
31 Furniture ($450 + $31.50 PST).............................................. 481.50
GST Recoverable ($450 × 5%) ............................................. 22.50
Accounts Payable........................................................... 504.00
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sale taxes paid on the purchase of goods and services.
Section Reference: Sales Taxes Paid on Payments
CPA: Financial Reporting
AACSB: Analytic
Exercise 11
Courts Plus sells tennis equipment. They have a perpetual inventory system and their store is
located in Ontario with an HST rate of 13%. The following transactions took place in April:
April 6 With terms 2/10, net 30, FOB shipping point Courts Plus purchased 350 racquets
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, Test Bank for Accounting Principles, Ninth Canadian Edition
for resale at $120 each before taxes from Racquets Inc.
16 As part of their spring-cleaning efforts, the owner picked up $400 worth of cleaning
supplies and paid using company cash.
22 Due to defects, Courts returned two racquets.
30 Purchased one new display unit on account for $500, plus applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 11
April 6 Merchandise Inventory (350 × $120)..................................... 42,000
HST Recoverable ($42,000 × 13%) ...................................... 5,460
Accounts Payable........................................................... 47,460
16 Supplies................................................................................. 400
HST Recoverable ($400 x 13%)............................................ 52
Cash............................................................................... 452
22 Accounts Payable.................................................................. 231.20
HST Recoverable ($240 x 13%)..................................... 31.20
Merchandise Inventory................................................... 200.00
30 Furniture................................................................................ 500
HST Recoverable ($500 × 13%) ........................................... 65
Accounts Payable........................................................... 565
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sale taxes paid on the purchase of goods and services.
Section Reference: Sales Taxes Paid on Payments
CPA: Financial Reporting
AACSB: Analytic
Exercise 12
Home Essence sells home accessories and other decorating supplies. They have a perpetual
inventory system and their business is located in British Columbia. BC’s PST rate is 7%. The
following transactions took place in May:
May 6 A batch of 250 decorative vases were purchased for resale at $50 each before
taxes from Sky View Decor Ltd. with terms 2/10, net 30, FOB shipping point.
16 Returned six of the vases as they were damaged in their packaging.
22 Picked up $100 worth of supplies for the office and paid with cash.
31 Purchased a display case for the store on account for $600, plus applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 12
May 6 Marchandise Inventory (250 × $50)....................................... 12,500
GST Recoverable ($12,500 × 5%) ........................................ 625
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Hello all ,
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, APPENDIX B: SALES TAXES
EXERCISES
Exercise 1
For the following provinces: New Brunswick, Newfoundland, Alberta, British Columbia, Yukon,
identify which sales tax or taxes they charge.
Solution 1
New Brunswick HST
Newfoundland HST
Alberta GST
British Columbia GST and PST
Yukon GST
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 2
For the following provinces: Nunavut, Manitoba, Ontario, Prince Edward Island, Saskatchewan,
identify which sales tax or taxes they charge.
Solution 2
Nunavut GST
Manitoba GST and PST
Ontario HST
Prince Edward Island HST
Saskatchewan GST and PST
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 3
Identify the three types of sales taxes and to whom the remittance must be made.
Solution 3
There are three types of sales taxes:
1) Goods and services tax (GST)
2) Provincial sales tax (PST)
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prohibited.
,Test Bank for Accounting Principles, Ninth Canadian Edition
3) Harmonized sales tax (HST)
GST and HST are remitted to the Receiver General for Canada, which is the collection agent for
the federal government (and in the case of HST also the provincial government). PST is
remitted to the Minister of Finance in the applicable province.
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 4
Here is a list of some typical goods and services:
Office supplies
Ready-to-eat pizza
One dozen doughnuts
Prescription drugs
Uncooked pizza
Municipal water
Instructions
For each item on the list, identify its GST/HST tax status as taxable, zero-rated, or exempt.
Solution 4
Office supplies – taxable
Ready-to-eat pizza – taxable
One dozen doughnuts – zero-rated
Prescription drugs – zero-rated
Uncooked pizza – zero-rated
Municipal water – exempt
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 5
Here is a list of some typical goods and services:
Banking services
Dental services
Building materials
Uncooked pizza
Prescription drugs
Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
,Test Bank for Accounting Principles, Ninth Canadian Edition
Instructions
For each item on the list, identify its GST/HST tax status as taxable, zero-rated, or exempt.
Solution 5
Banking services – exempt
Dental services – exempt
Building materials – taxable
Uncooked pizza – zero-rated
Prescription drugs – zero-rated
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the different types of sales taxes.
Section Reference: Types of Sales Taxes
CPA: Financial Reporting
AACSB: Analytic
Exercise 6
Maine Event is a new salon located in Winnipeg, Manitoba. The following information relates to
transactions that took place in June. Maine Event uses a perpetual inventory system and uses
the earnings approach for revenue recognition.
June 3 In the salon, $500 worth of hair services were performed for cash. These services
are subject to PST of 7% and GST.
4 A sale of $100 worth of products is made on account to James Zing. The cost of
the product to Maine was $85.
10 James Zing returned $25 worth of product. This product had a cost of $15 and was
returned to goods for resale.
30 James Zing paid his outstanding balance.
Instructions
Prepare the journal entries to record these transactions. .
Solution 6
June 3 Cash...................................................................................... 560
Service Revenue............................................................ 500
PST Payable ($500 x 7%).............................................. 35
GST Payable ($500 x 5%).............................................. 25
4 Accounts Receivable............................................................. 112
Sales............................................................................... 100
PST Payable ($100 x 7%).............................................. 7
GST Payable ($100 x 5%).............................................. 5
Cost of Goods Sold ............................................................... 85
Merchandise Inventory................................................... 85
10 Sales Returns and Allowances.............................................. 25.00
PST Payable ($25 x 7%)....................................................... 1.75
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,Test Bank for Accounting Principles, Ninth Canadian Edition
GST Payable ($25 x 5%)....................................................... 1.25
Accounts Receivable...................................................... 28.00
Merchandise Inventory.......................................................... 15
Cost of Goods Sold ........................................................ 15
30 Cash ($112.00 – $28.00)....................................................... 84
Accounts Receivable...................................................... 84
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 7
The following information relates to transactions that took place in April for Trip n Trail Inc. Trip n
Trail is located in Trail, BC, uses a perpetual inventory system, and uses the earnings approach
for revenue recognition.
Apr. 2 In the shop, a total of $1,500 worth of backpack repair services were performed for
cash. These services are subject to PST of 7% and GST.
6 Sales of $12,000 worth of camping-related merchandise were made on account to
Trips R Us. The cost of the products to Trip was $8,500.
12 A return of $2,500 worth of products received from Trips R Us as they ordered an
incorrect pack size. This product had a cost of $1,500 and was returned to goods
available for sale.
30 Trips R Us settles their outstanding balance.
Instructions
Prepare the journal entries to record these transactions.
Solution 7
Apr. 2 Cash...................................................................................... 1,680
Service Revenue............................................................ 1,500
PST Payable ($1,500 x 7%)........................................... 105
GST Payable ($1,500 x 5%)........................................... 75
6 Accounts Receivable............................................................. 13,440
Sales............................................................................... 12,000
PST Payable ($12,000 x 7%)......................................... 840
GST Payable ($12,000 x 5%)......................................... 600
Cost of Goods Sold ............................................................... 8,500
Merchandise Inventory................................................... 8,500
12 Sales Returns and Allowances.............................................. 2,500
PST Payable ($2,500 x 7%).................................................. 175
GST Payable ($2,500 x 5%).................................................. 125
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,Test Bank for Accounting Principles, Ninth Canadian Edition
Accounts Receivable...................................................... 2,800
Merchandise Inventory.......................................................... 1,500
Cost of Goods Sold ........................................................ 1,500
30 Cash ($13,440 – $2,800)....................................................... 10,640
Accounts Receivable...................................................... 10,640
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 8
Maine Event is a new salon located in Saint John, New Brunswick. The following information
relates to transactions that took place in June. Maine Event uses a perpetual inventory system
and uses the earnings approach for revenue recognition.
June 3 In the salon, $500 worth of hair services were performed for cash. These services
are subject to HST of 15%.
4 A sale of $100 worth of products is made on account to James Zing. The cost of
the product to Maine was $85.
10 James Zing returned $25 worth of product. This product had a cost of $15 and was
returned to goods available for sale.
30 James Zing paid his outstanding balance.
Instructions
Prepare the journal entries to record these transactions. .
Solution 8
June 3 Cash...................................................................................... 575
Service Revenue............................................................ 500
HST Payable ($500 x 15%)............................................ 75
4 Accounts Receivable............................................................. 115
Sales............................................................................... 100
HST Payable ($100 x 15%)............................................ 15
Cost of Goods Sold ............................................................... 85
Merchandise Inventory................................................... 85
10 Sales Returns and Allowances.............................................. 25.00
HST Payable ($25 x 15%)..................................................... 3.75
Accounts Receivable...................................................... 28.75
Merchandise Inventory.......................................................... 15
Cost of Goods Sold ........................................................ 15
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,Test Bank for Accounting Principles, Ninth Canadian Edition
30 Cash ($115.00 – $28.75)....................................................... 86.25
Accounts Receivable...................................................... 86.25
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 9
The following information relates to transactions that took place in April for Trip n Trail Inc. Trip n
Trail is located in Fort Erie, Ontario, uses a perpetual inventory system, and uses the earnings
approach for revenue recognition.
April 2 In the shop a total of $1,500 worth of backpack repair services were performed for
cash. These services are subject to HST of 13%.
6 Sales of $12,000 worth of camping-related merchandise were made on account to
Trips R Us. The cost of the products to Trip was $8,500.
12 A return of $2,500 worth of products received from Trips R Us as they ordered an
incorrect pack size. This product had a cost of $1,500 and was returned to goods
available for sale.
30 Trips R Us settles their outstanding balance.
Instructions
Prepare the journal entries to record these transactions.
Solution 9
Apr. 2 Cash...................................................................................... 1,695
Service Revenue............................................................ 1,500
HST Payable ($1500 x 13%).......................................... 195
6 Accounts Receivable............................................................. 13,560
Sales............................................................................... 12,000
HST Payable ($12,000 x 13%)....................................... 1,560
Cost of Goods Sold ............................................................... 8,500
Merchandise Inventory................................................... 8,500
12 Sales Returns and Allowances.............................................. 2500
HST Payable ($2,500 x 13%)................................................ 325
Accounts Receivable...................................................... 2,825
Merchandise Inventory.......................................................... 1,500
Cost of Goods Sold ........................................................ 1,500
30 Cash ($13,560 – $2,825)....................................................... 10,735
Accounts Receivable...................................................... 10,735
Bloomcode: Application
Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
,Test Bank for Accounting Principles, Ninth Canadian Edition
Difficulty: Medium
Learning Objective: Record sales taxes collected by businesses on good and services.
Section Reference: Sales Taxes Collected on Receipts
CPA: Financial Reporting
AACSB: Analytic
Exercise 10
Great Green Landscaping sells lawn maintenance equipment. They use a perpetual inventory
system and their operations are located in Manitoba. The Manitoba PST rate is 7%. The
following transactions took place in May:
May 6 Purchased 350 trimmers for resale at $100 each before taxes from Trim It with
.............................. terms 2/10, net 30, FOB shipping point.
16 Returned two of the trimmers as they were defective.
22 Picked up $250 worth of supplies to be used in the sales office and paid with cash.
31 Purchased two desks to be used in the sales office on account for $450, plus
applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 10
May 6 Merchandise Inventory (350 × $100)..................................... 35,000
GST Recoverable ($35,000 × 5%) ........................................ 1,750
Accounts Payable........................................................... 36,750
16 Accounts Payable.................................................................. 210
GST Recoverable ($200 x 5%)....................................... 10
Merchandise Inventory................................................... 200
22 Supplies ($250 + $17.50 PST) .............................................. 267.50
GST Recoverable ($250 x 5%).............................................. 12.50
Cash............................................................................... 280.00
31 Furniture ($450 + $31.50 PST).............................................. 481.50
GST Recoverable ($450 × 5%) ............................................. 22.50
Accounts Payable........................................................... 504.00
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sale taxes paid on the purchase of goods and services.
Section Reference: Sales Taxes Paid on Payments
CPA: Financial Reporting
AACSB: Analytic
Exercise 11
Courts Plus sells tennis equipment. They have a perpetual inventory system and their store is
located in Ontario with an HST rate of 13%. The following transactions took place in April:
April 6 With terms 2/10, net 30, FOB shipping point Courts Plus purchased 350 racquets
Copyright © 2022 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
, Test Bank for Accounting Principles, Ninth Canadian Edition
for resale at $120 each before taxes from Racquets Inc.
16 As part of their spring-cleaning efforts, the owner picked up $400 worth of cleaning
supplies and paid using company cash.
22 Due to defects, Courts returned two racquets.
30 Purchased one new display unit on account for $500, plus applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 11
April 6 Merchandise Inventory (350 × $120)..................................... 42,000
HST Recoverable ($42,000 × 13%) ...................................... 5,460
Accounts Payable........................................................... 47,460
16 Supplies................................................................................. 400
HST Recoverable ($400 x 13%)............................................ 52
Cash............................................................................... 452
22 Accounts Payable.................................................................. 231.20
HST Recoverable ($240 x 13%)..................................... 31.20
Merchandise Inventory................................................... 200.00
30 Furniture................................................................................ 500
HST Recoverable ($500 × 13%) ........................................... 65
Accounts Payable........................................................... 565
Bloomcode: Application
Difficulty: Medium
Learning Objective: Record sale taxes paid on the purchase of goods and services.
Section Reference: Sales Taxes Paid on Payments
CPA: Financial Reporting
AACSB: Analytic
Exercise 12
Home Essence sells home accessories and other decorating supplies. They have a perpetual
inventory system and their business is located in British Columbia. BC’s PST rate is 7%. The
following transactions took place in May:
May 6 A batch of 250 decorative vases were purchased for resale at $50 each before
taxes from Sky View Decor Ltd. with terms 2/10, net 30, FOB shipping point.
16 Returned six of the vases as they were damaged in their packaging.
22 Picked up $100 worth of supplies for the office and paid with cash.
31 Purchased a display case for the store on account for $600, plus applicable taxes.
Instructions
Prepare the journal entries to record these transactions.
Solution 12
May 6 Marchandise Inventory (250 × $50)....................................... 12,500
GST Recoverable ($12,500 × 5%) ........................................ 625
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