The following selected transactions were completed by Drains Co. during November of the current year. The company sells irrigation supplies to both wholesalers and retail customers.
Nov. 2. Sold merchandise on account to Tree Co. (a wholesaler), $11,000, terms FOB shipping point, n/eom. The cost of the goods sold was $6,000.
6. Sold merchandise for $18,000 to retail cash customers. The cost of goods sold was $7,000.
7. Sold merchandise on account to Magnolia Inc. (a retail company), $25,000, terms FOB destination, 2/10, n/30. The cost of goods sold was $12,500.
12. Purchased supplies and inventory on account from Morin Company for $3,000 and $3,500 respectively.
16. Received cheque for amount due from Magnolia Inc. for the sale on November 7.
16. Issued credit memo for $1,800 to Tree Co. for merchandise returned from the sale on November 2. The cost of the goods returned was $900.
28. Received cheque for amount due from Tree Co. for the November 2 sale, less returned merchandise.
Instructions
Choose the scenario below that best matches the tax rate in your province. Journalize the entries to record the selected transactions for November and the tax remittances in December, assuming the perpetual inventory system.
a. The PST rate is 7%. On December 31, Drains Co. paid provincial sales taxes payable of $6,300.
b. The PST is 6% and the GST is 5%. On December 31, Drains Co. paid provincial sales tax payable of $3,500. Also on December 31, Drains Co. filed its GST return. The GST Paid on Purchases account balance was $6,300, and the GST Charged on Sales account balance was $8,300.
c. The HST is 13%. On December 31, Drains Co. filed its HST return. The HST Paid on Purchases account balance was $6,300, and the HST Charged on Sales account balance was $8,300.