In July 1993, Shanghai Petrochemical Company Limited became the first company organized under the laws of the People’s Republic of China to publicly issue its shares on the worldwide market. Shanghai Petrochemical’s shares now trade on the stock exchanges in Shanghai, Hong Kong, and New York. The following questions are adapted from information appearing in Shanghai Petrochemical’s 1995 annual report.

1. In 1995, Shanghai Petrochemical reported sales of 11.835 billion renminbi (US$ 1 = 8.33 RMB) and cost of sales of RMB 9.016 billion. Make the necessary journal entries, using renminbi as the currency.

2. In 1995, Shanghai Petrochemical declared cash dividends of RMB 851.5 million. However, cash paid for dividends during the year was only RMB 818.8 million. Make the necessary compound journal entry to record the declaration and payment of cash dividends for the year.

3. In China, a 17% value-added tax (VAT) is added to the invoiced value of all sales. This VAT is collected by the seller from the buyer and then held to be forwarded to the government. What journal entry would Shanghai Petrochemical make to record the sale, on account, of crude oil with an invoice sales value of $100 and a cost of $70?