Question

Good evening, Please answer the following question:

The following are selected transactions of Pendlebury Department Store Ltd. (PDSL) for the current year ending December 31. PDSL is a private company operating in the province of Manitoba.

• 1. On February 2, PDSL purchased goods having cash discount terms of 2/10, n/30 from Hashmani Limited for $46,000. Purchases and accounts payable are recorded using the periodic system at net amounts after cash discounts. The invoice was paid on February 26.
• 2. On April 1, PDSL purchased a truck for $50,000 from Schuler Motors Limited, paying $5,000 cash and signing a one-year, 8% note for the balance of the purchase price.
• 3. On May 1, PDSL borrowed $83,000 from First Provincial Bank by signing a $92,000 non-interest-bearing note due one year from May 1.
• 4. On June 30 and December 31, PDSL remitted cheques for $19,000 each as instalments on its current year tax liability.
• 5. On August 14, PDSL's board of directors declared a $13,000 cash dividend that was payable on September 10 to shareholders of record on August 31.
• 6. On December 5, PDSL received $750 from Jefferson Ltd. as a deposit on a trailer that Jefferson is using for an office move. The deposit is to be returned to Jefferson after it returns the trailer in good condition on January 15.
• 7. On December 10, PDSL purchased new furniture and fixtures for $8,000 on account. Provincial sales tax of 8% and GST of 5% were charged by the supplier on the purchase price.
• 8. During December, cash sales of $79,000 were recorded, plus 8% provincial sales tax and 5% GST that must be remitted by the 15th day of the following month. Both taxes are levied on the sale amount to the customer.
• 9.PDSL's lease for its store premises calls for a $2,500 monthly rental payment plus 3% of net sales. The payment is due one week after month-end.
• 10.PDSL was advised during the month of December that it is legally required to restore the area (considered a land improvement) surrounding one of its new store parking lots when the store is closed in 12 years. PDSL estimates that the fair value of this obligation at December 31 is $46,000.
• 11. The corporate tax return indicated a taxable income of $205,000. PDSL's income tax rate is 20%.

• Instructions (a)   Prepare all the journal entries that are necessary to record the above transactions when they occurred and any adjusting journal entries (except for depreciation expense) relative to the transactions that would be required to present financial statements at December 31 in accordance with GAAP. Date each entry. (b)   Identify the current liabilities that will be reported on PDSL's December 31 statement of financial position, and indicate the amount of each one. (c)   Prepare the journal entries for transactions 7 and 8 above if the 8% sales tax was applied on the purchase or sale amount plus the GST.

Answer 1

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Event	Date	Accounts	Debit	Credit
1	Feb 2	Purchases ($46,000 X 98%)	$   45,080
		Accounts Payable		$      45,080
	Feb 26	Accounts Payable	$   45,080
		Purchase Discounts Lost	$         920
		Cash		$      46,000
2	Apr 1	Trucks	$   50,000
		Cash		$        5,000
		Notes Payable		$      45,000
3	May 1	Cash	$   83,000
		Notes Payable		$      83,000
4	Jun 30	Income Tax Expense	$   19,000
		Cash		$      19,000
5	Aug 14	Retained Earnings (Dividends Declared)	$   13,000
		Dividends Payable		$      13,000
	Sep 10	Dividends Payable	$   13,000
		Cash		$      13,000
6	Dec 5	Cash	$         750
		Returnable Deposit Liability		$            750
7	Dec 10	Display Cases ($8,000 X 1.08)	$     8,640
		GST Receivable ($8,000 X .05)	$         400
		Accounts Payable		$        9,040
8	Dec 31	Cash	$   89,270
		Sales		$      79,000
		Sales Taxes Payable ($79,000 X .08)		$        6,320
		GST Payable ($79,000 X .05)		$        3,950
9	Dec 31	Rental Expense	$     4,870
		Rental Payable		$        4,870
		($2,500 + [3% X $79,000])
10	Dec 31	Parking Lot	$   46,000
		Asset Retirement Obligation		$      86,000
4	Dec 31	Income Tax Expense	$   19,000
		Cash		$      19,000
11	Dec 31	Income Tax Expense	$     3,000
		Income Taxes Payable		$        3,000
		($205,000 X 20%) – ($19,000 X 2)
	Dec 31	Interest Expense ($45,000 X 8% X9/12)	$     2,700
		Interest Payable		$        2,700
	Dec 31	Interest Expense ($9,000 X 8/12)	$     6,000
		Notes Payable		$        6,000
		(b) Current Liabilities:
		Accounts Payable			$        9,040
		Note Payable		$      45,000
		Interest Payable		$        2,700	$      47,700
		Note Payable			$      89,000
		Sales Taxes Payable			$        6,320
		GST Payable ($3,950 – $400)			$        3,550
		Rental Payable			$        4,870
		Income Taxes Payable			$        3,000
		Returnable Deposit Liability			$            750
		Total Current Liabilities			$   164,230
		Part c
	Dec 10	Display Cases ($8,000 + [$8,000 X 1.05 X .08])	$     8,672
		GST Receivable ($8,000 X .05)	$         400
		Accounts Payable		$        9,072
	Dec 31	Cash	$   89,586
		Sales		$      79,000
		Sales Taxes Payable ($79,000 X 1.05 X .08)		$        6,636
		GST Payable ($79,000 X .05)		$        3,950