Manny Lee, L.L.B., is a lawyer operating as a sole proprietor in the province of Alberta. Alberta does not charge provincial sales taxes and the GST rate is 5%. Transactions for the business are shown below:
May 1 Signed a two-year lease for the office space and immediately paid the first and last months' rent.
The lease calls for monthly rent of $1,650 plus applicable taxes.
4 Purchased furniture, on account, from George's Furniture at a cost of $4,100. The appropriate sales taxes were added to this purchase price.
5 Returned one chair to George's due to a defect. The cost of the chair before taxes was $800.
6 Billed a client for the preparation of a contract. The client was very pleased with the document and immediately paid Manny's invoice for fees of $2,500 plus taxes.
10 Purchased paper for the photocopier for $300 cash from a local stationery store. The store added the appropriate sales taxes to the purchase price.
13 Billed Manson Ltd. for legal services rendered connected with the purchase of land. The fee charged is $1,100 plus applicable taxes.
18 Paid George's for the furniture purchase of May 4, net of returned items.
19 Paid $22 cash to a local grocery store for coffee for the office coffee machine. Groceries are GST and HST exempt. Use Office Expense.
21 In accordance with the lease agreement with the landlord, Manny must pay for water supplied by the municipality. The water invoice was received and the services amounted to $150. No GST is charged for municipal water.
25 Collected a full payment from Manson Ltd. for the May 13 bill.
27 Completed the preparation of a purchase and sale agreement for Pedneault Inc. and billed fees of $600.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Manny Lee's law practice.
(b) Determine the balances in the GST Payable and GST Recoverable accounts. Determine if the company must make a payment to the Receiver General or if it will apply for a refund. Record the appropriate journal entry?