Refer to Manny Lee in PB-5. Assume instead that Mr. Lee operates in the province of Ontario, where the HST rate is 13%.
Data from PB-5,
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.
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 HST Payable and HST Recoverable accounts. Determine if the business must make a payment to the Receiver General or if it will apply for a refund. Record the appropriate journal entry?