Transaction data for Mark’s Music are available in PB.1. Assume that the company uses a periodic inventory system instead of a perpetual inventory system, uses the earnings approach for revenue recognition, and operates in the province of British Columbia, where the PST rate is 7% and the GST rate is 5%. 

Instructions 

Prepare the journal entries to record these transactions on the books of Mark’s Music. 

Data from PB.1

Mark’s Music is a store that buys and sells musical instruments in Ontario, where the HST rate is 13%. Mark’s Music uses a perpetual inventory system and the earnings approach to revenue recognition. Transactions for the business are shown below:

Nov. 2 Purchased three electric guitars from Fender Supply Limited, on account, at a cost of $900 each. 

4 Made a cash sale of two keyboards for a total invoice price of $2,600 plus applicable taxes. The cost of each keyboard was $675. 

5 Received a credit memorandum from Western Acoustic Inc. for the return of an acoustic guitar that was defective. The original invoice price before taxes was $700 and the guitar had been purchased on account. Mark’s Music intends to return the defective guitar to the original supplier. 

7 One of the keyboards from the cash sale of November 4 was returned to the store for a full cash refund because the customer was not satisfied with the instrument. The keyboard, which cost $675, was returned to inventory. 

8 Purchased supplies from a stationery store. The price of the supplies is $200 before all applicable taxes. 

10 Sold one Omega trumpet to Regional Band, on account, for an invoice price of $5,100 before applicable taxes. The trumpet had cost Mark’s Music $2,850. 

13 Purchased two saxophones from Yamaha Canada Inc. on account. The invoice price was $1,900 for each saxophone, excluding applicable taxes. 

14 Collected $4,150 on account. The payment included all applicable taxes. 

16 Returned to Yamaha Canada Inc. one of the saxophones purchased on November 13, as it was the wrong model. Received a credit memorandum from Yamaha for the full purchase price. 

20 Made a payment on account for the amount owing to Fender Supply Limited for the purchase of November 2.