Reference no: EM132835475
Swanson Ltd., a private company following ASPE, is a merchant and operates in a province that has both PST and GST taxes. The 10% PST rate is charged on the base amount plus the 5% GST rate.
Problem 1: Prepare the journal entries to record these transactions on the books of Swanson. Rental payments and inventory purchased for resale are PST-exempt.
a) Paid March rent to the landlord for the rental of a warehouse. The lease calls for monthly payments of $5,500 plus 5% GST.
b) Sold merchandise on account and shipped merchandise to Marcus Ltd. for $20,000, terms n/30, f.o.b. shipping point. This merchandise cost Swanson $11,000.
c) Granted Marcus Ltd. a sales allowance of $500 (exclusive of taxes) for defective merchandise purchased on March 3. No merchandise was returned.
d) Purchased merchandise for resale on account from Tinney Ltd. At a list price of $4,000, plus applicable tax.
e) Purchased a desk for the shipping clerk, and paid in cash. The price of the desk was $600 before applicable tax.
f) Paid the monthly remittance of GST to the Receiver General for Canada.
g) Paid the monthly PST remittance to the Treasurer of the province that Swanson Ltd. resides in.