Question

In: Accounting

Crane Company had the following selected transactions. Feb. 2 Purchases supplies from Supplies R Us on...

Crane Company had the following selected transactions.

Feb. 2 Purchases supplies from Supplies R Us on account for $2,500.
10 Cash register sales total $42,300, plus 5% GST and 8% PST.
15 Signs a $34,300, six-month, 6%-interest-bearing note payable to MidiBank and receives $34,300 in cash.
21 The payroll for the previous two weeks consists of salaries of $49,000. All salaries are subject to CPP of $2,262 and EI of $920 and income tax of $8,700. The salaries are paid on February 28. The employer’s payroll expense is also recorded.
28 Accrues interest on the MidiBank note payable.
28 Accrues the required warranty provision because some of the sales were made under warranty. Of the units sold under warranty, 340 are expected to become defective. Repair costs are estimated to be $40 per unit.
28 Pays employees the salaries for the pay period ending February 21.
Mar. 1 Remits the sales taxes to the Province and GST to the Receiver General for the February 10 sales.
2 Makes the payment to Supplies R Us from the February purchase.
15 Remits the payroll taxes owing from the February 21 payroll to the Receiver General.

Solutions

Expert Solution

ANSWER:

Feb. 2        Supplies...................................................................         2,500

                                 Accounts Payable............................................                            2,500

                    10  Cash........................................................................       48,816

                                 Sales................................................................                          43,200

                                 GST Payable....................................................                            2,160

                                 PST Payable....................................................                            3,456

                    15  Cash........................................................................       34300

                                 Notes Payable..................................................                          34300

                    21  Salaries Expense.....................................................       49000

                                 CPP Payable....................................................                            2262

                                 EI Payable.......................................................                               920

                                 Income Tax Payable........................................                            8700

                                 Salaries Payable (difference)................................    37118

                    21  Employee Benefits Expense...................................         3550   

                                 CPP Payable....................................................                            2262

                                 EI Payable ($920 x 1.4)...................................                            1288

                    28  Interest Expense..................................................... 85.75

                                 Interest Payable...............................................                            85.75

                          ($34300 x 6% x 1/12 X .5)

                    28  Warranty Expense...................................................       13600

                                 Warranty Liability. ............................. 13600   

(340*$40)

                    28  Salaries Payable......................................................       37118

                                 Cash.................................................................                          37118

Mar.               1  GST Payable...........................................................         2,160

                          PST Payable............................................................         3,456

                                 Cash.................................................................                            5,616

                      2  Accounts Payable...................................................         2,500

                                 Cash.................................................................                            2,500

                    15  CPP Payable ($2262 x 2).......................................         4524

                          EI Payable ($920 + $1288)....................................         2208

                          Income Tax Payable................................................         8700

                                 Cash.................................................................                          15432

Taking It Further:

Some additional mandatory employee benefits paid entirely by the employer include payments to fund the workplace health, safety, and compensation plan. Vacations are also mandatory and the amounts and limits vary among provinces. The remaining benefits are not mandatory and have more to do with the negotiated employment package with employees. The latter could include full or partial payments into pension plans, savings plans, and medical or life insurance related coverage. Finally, again based on a business’ practice, paid absences for sick leave, for example, are additional employee benefits paid by the employer.

Mandatory and negotiated employee benefit costs are accounted for as expenses when incurred.


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