Question

Pharoah Company had the following selected transactions.

Feb. 2		Purchases supplies from Supplies R Us on account for $2,700.
10		Cash register sales total $46,700, plus 5% GST and 8% PST.
15		Signs a $37,800, six-month, 6%-interest-bearing note payable to MidiBank and receives $37,800 in cash.
21		The payroll for the previous two weeks consists of salaries of $54,000. All salaries are subject to CPP of $2,493 and EI of $1,020 and income tax of $9,600. 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, 380 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.

Answer 1

Answer:

Feb. 2        Supplies...................................................................         2,700

                                 Accounts Payable............................................                            2,700

                    10  Cash........................................................................       52771

                                 Sales................................................................                          46700

                                 GST Payable (46700*5%)..............................                            2335

                                 PST Payable(46700*8%)................................                            3736

                    15  Cash........................................................................       37800

                                 Notes Payable..................................................                          37800

                    21  Salaries Expense.....................................................       54000

                                 CPP Payable....................................................                            2493

                                 EI Payable.......................................................                               1020

                                 Income Tax Payable.........................................                            9600

                                 Salaries Payable(difference)............................                          40887

                    21  Employee Benefits Expense................................... 3921   

                                 CPP Payable....................................................                            2493

                                 EI Payable ($1020 x 1.4)...................................                            1428

                    28  Interest Expense.....................................................         94.50

                                 Interest Payable...............................................                            94.50

                          ($37800 x 6% x 1/12 X .5)

                    28  Warranty Expense...................................................       15200

                                 Warranty Liability............... (380*40) 15200   

                       

                    28  Salaries Payable......................................................       40887

                                 Cash.................................................................                          40887

Mar.               1  GST Payable...........................................................         2335

                          PST Payable............................................................         3736

                                 Cash.................................................................                            6071

                      2  Accounts Payable...................................................         2700

                                 Cash.................................................................                            2700

                    15  CPP Payable ($2493 x 2).......................................         4986

                          EI Payable ($1020 + $1428)....................................         2448

                          Income Tax Payable................................................         9600

                                 Cash.................................................................                          17034

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.