Exercise 102 Chen Wholesalers Ltd incurred the following tra

Exercise 10-2 Chen Wholesalers Ltd. incurred the following transactions related to current liabilities: 1. Chen\'s cash register showed the following totals at the end of the day on March 17: pre-tax sales $55,000; GST S2,750; and PST $3,850 2. Chen received its property tax bill for the calendar year for $51,600 on May 1, payable July 1. 3. Chen\'s gross payroll for the week of August 15 was $79,300. The company deducted $3,720 for CPP, $1,491 for EI, 5,700 for pension, and $16, 130 for income tax from the employees\' pay. The employer portions of CPP and El for the week were $3,720 and $2,087 respectively 4. On August 22, all amounts owing for employee income taxes, CPP, and EI pertaining to the payroll in transaction 3 above were paid 5. On October 1, Chen borrowed S80,000 from First Bank for a six-month period: 4% interest on the bank loan is payable on April 1.

Solution

Date Account Titles and Explanation Debit Credit Mar. 17 Cash 61600 Sales revenue 55000 GST payable 2750 PST payable 3850 (To record cash sales) May. 1 Property tax expense 51600 Property tax payable 51600 (To record property tax bill) Jul. 1 Property tax payable 51600 Cash 51600 (To record payment of property tax) Aug. 15 Salaries and wages expense 79300 CPP payable 3720 EI payable 1491 Pension payable 5700 Income tax payable 16130 Salaries and wages payable 52259 (To record payroll and employee deductions) Aug. 15 Payroll tax expense 5807 CPP payable 3720 EI payable 2087 (To record employee benefits) Aug. 22 CPP payable 7440 EI payable 3578 Income tax payable 16130 Cash 27148 (To record payments) Oct. 1 Cash 80000 Bank loan payable 80000 (To record borrowing form First Bank) Date Account Titles and Explanation Debit Credit Dec. 31 Prepaid property tax ($51600 x 4/12) 17200 Property tax expense 17200 (To record property tax) Dec. 31 Interest expense ($80000 x 4% x 3/12) 800 Interest payable 800 (To record interest) Date Account Titles and Explanation Debit Credit Apr. 1 Interest payable 800 Interest expense ($80000 x 4% x 3/12) 800 Bank loan payable 80000 Cash 81600 (To record settlement of bank loan and interest)