Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Gear Out There (GOT) Inc., is a wholesale company selling supplies and materials for climbing, hiking and other outdoor activities mainly to the retail supply

Gear Out There (GOT) Inc., is a wholesale company selling supplies and materials for climbing, hiking and other outdoor activities mainly to the retail supply stores in British Columbia.

Gear Out There (GOT) Inc. is incorporated under the laws of British Columbia, and is required to remit GST, Goods and Services Tax, at the rate of 5% on all its sales and must remit taxes collected to the federal government on a quarterly basis. GST amounts charged by its suppliers can be deducted from this remittance (these deductions called an ITC credit) however this is not the case for PST.

Gear Out There (GOT) Inc. is required to remit PST, Provincial Sales Tax, at the rate of 7% on all its sales and must remit taxes collected to the provincial government on a monthly basis. Gear Out There (GOT) Inc. is considering an IPO (Initial Public Offering) and listing on the TSX, Toronto Stock Exchange. Management is discussing the potential to expand into global adventure tourism. Therefore, IFRS accounting standards are used. Gear Out There (GOT) Inc. negotiated with most of its trade suppliers 1% discount if paid within 20 days (1%, n/20). Otherwise the net amount is due within 21 to 30 days without penalty. Be sure to correct for GST actually paid on purchase when recording the discount given.

Gear Out There (GOT) Inc. pays its workforce according to the Employment Standards Act of British Columbia. The employer remits 1.4 times the employee portion of EI. The employer remittance of CPP is equal to the employee portion. All regulatory source deductions should be accounted for (both employee and employer portion). The WorkSafe BC assessment rate is 1% of gross salaries.

Transactions for June, 2020

June 2 - Sold merchandise to East Robson Inc. at invoice price of $30,000 + GST + PST; on credit; Invoice No. 1001

June 3 - Received merchandise from Everest Company at invoice cost of $4,000 + GST; credit terms, 1%, n /20; Purchase Order No. 5001. No PST since the manager provided the provincial vendor number to the supplier. There will be no PST paid on any merchandise purchased.

June 4 - Sold merchandise to West Rupert Co. for $5,000 + GST + PST; on credit terms; Invoice No. 1002

June 5 - Received merchandise from Katmandu Ltd. at an invoice cost of $3,000 + GST on credit; terms, 1%, n/20; Purchase Order No. 5002

June 6 - Sold merchandise for cash to Tabor Equipment for $7,000 + GST + PST

June 7 - Received merchandise from Colton Manufacturing Company at a cost of $2,000 + GST; paid cash.

June 8 - Purchased a capital asset (store equipment) at a cost of $19,100 + GST + PST; gave a 90-day, 6 percent, interest-bearing note payable for the purchase price; assume date was June 1, 2020 for interest and depreciation calculations (at adjustments stage)

June 9 - Sold a tract of land for $10,000 + GST which previously was used by the company and originally cost $3,000; collected cash

June 10- Collected the account receivable from West Rupert Co.; Invoice No. 1002 June 11- Paid $1,200 for a one-year insurance policy on property, plant and equipment starting June 1, 2020

June 11- Obtained a $6,000 bank loan; signed a one-year, 7 percent, interest-bearing bank loan agreement. Assume date was June 1, 2020 for interest calculation (at adjustments stage)

June 12- Paid the account payable to Katmandu Ltd. within the discount period. Purchase Order No. 5002

June 13- Paid monthly rent, $2,000 + GST

June 14- Sold merchandise for cash, $4,000 + GST + PST

June 15- Purchased merchandise from Logan Ltd. for cash, $4,000 + GST terms 1% n/20. INV 10021

June 15- Paid May 31st source deductions to the Canada Revenue Agency (CRA), payable to the Receiver General; CPP $370; EI $135; taxes $1675

June 16- Sold merchandise on credit to Purdon Co. for $6,000 + GST + PST; Invoice No. 1003

June 17- Received merchandise on credit from Mountain Co-Op at an invoice cost of $8,000 + GST; terms 1% n/20; Purchase Order No. 5003

June 18- Collected the account receivable from East Robson Inc. Invoice No. 1001

June 19- Paid the account payable to Everest Company. Purchase Order No. 5001

June 20- Returned merchandise purchased on account from Logan Ltd.; amount $4,000 + GST invoice 10021.

June 21- Received dividend revenue of $2,000 from the held-for-trading investments.

June 25- Paid May 31st PST payable to the Minister of Finance

June 29- Purchased 500 held-for-trading shares of Ocean Electronics Inc. at $20.00 per share.

June 30- Paid May 31st Worksafe BC payable to Worksafe BC, the assessment department of the Workers Compensation Board

June 30- Paid May 31st GST payable to the Receiver General of Canada

June 30- Paid monthly salaries: gross earnings $7,000 less; employee CPP $343; employee EI $123; employee income taxes $1,313. Remember to include employer portions of CPP and EI and $70 for Worksafe BC premiums as well.

Adjustments Data developed by Gear Out There (GOT) Inc. as a basis for the adjusting entries at June 30, 2020 were:

a) The average loss rate for bad debts is estimated to be 1 percent of net sales (as per chart of accounts). Record for the month of June.

b) The store equipment is depreciated on the straight-line basis of an estimated 10-year useful life with no residual value. The equipment purchased in the period can be depreciated for the entire month. Record one-month depreciation.

c) On June 30, 2020, the periodic inventory count of goods remaining on hand reflected $25,000. GOT records purchases, returns, and discounts to their respective expense account during the year; GOT then allocates to Inventory at period end according to what the ending inventory count shows. ***Purchases (Acct.5010), Purchases Returns (Acct.5020) and Purchase Discounts (Acct.5030) must be nil ($0) at the end of the period, and reallocated to Cost of Goods Sold. From there, inventory is adjusted.

d) Account for the Interest expense on the Note Payable and the Bank Loan; round to the nearest dollar. Record one month interest expense. e) Uncollectible amounts written off from accounts receivable total $560. f) Account for the Insurance expense, if applicable. g) Unrecorded corporate income tax expense is $2,500

QUESTION -

Take the Gear Out There (GOT) Inc. Balance Sheet, as at May 31, 2020, and continue recording transactions for the fiscal year end of June 30, 2020 as follows:

1. Analyze each of the June transactions and prepare a journal entry in the General Journal (use the template provided). Please number your journal entries, and include the date as well as a description for full marks.

2. Post the above journal entries to the General Ledger (T-Accounts). Use General Ledger account numbers as per the Chart of Accounts and fill in the beginning balances before posting the June transactions.

3. Journalize and post the adjusting journal entries to the General Ledger.

4. Prepare the June 30, 2020 Adjusted Trial Balance (Includes ordinary business journal entries, as well as adjusting entries).

5. Prepare the multi-step Income Statement for the month of June and the classified Statement of Financial Position/Balance Sheet (same as assignment/beginning May financials) as at June 30, 2020. (Amounts may be rounded to the nearest dollar)

image text in transcribedimage text in transcribed6. Briefly comment on the financial health of Gear Out There (GOT) Inc.

the templete given to me is not nessescary, cab be done on your own, Thank you so much
Gear Out There (GOT) Inc. Statement of Financial Position As at May 31, 2020 ASSETS $34,100 Current Assets Cash Accounts receivable Less: Allowance for doubtful accounts Inventory Total Current Assets $5,000 (1,000) 4,000 20.000 $58, 100 Property, Plant and Equipment Store equipment Less: Accumulated depreciation, equipment Land Total Property, Plant and Equipment $30,000 (9.000) 21,000 3,000 $24,000 TOTAL ASSETS $82 100 LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable PST payable GST payable Payroll liabilities Total Current Liabilities $ 7,500 1,000 500* 2380* $11,380 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $10,000 60.720 $70,720 $82.100 *post this amount for June 1 opening balance to #2380 GST collected on sales **comprises #2215 El payable $135; #2220 CPP payable $370; #2225 Incomes tax payable $1875: #2170 Worksafe BC payable $200 The Chart of Accounts of Gear Out There (GOT) Inc. LASSET ACCOUNTS 1000 TO 1999 1080 Cash 11200 Accounts receivable 1205 Allowance for doubtful accounts Subtota Accounts receivable. Net 1300 Prepaid insurance 1301 Prepaid rent 1350 Inventory 1400 Investments Total Current Asses 1820 Equipment 1825 Accumulated Depreciation equipment Sublots! equipment. Net 1880 Land Subtotal Property. Plant, and Equipment. Nel Total Long Term Assets GRAND TOTAL ASSETS LIABILITIES ACCOUNTS 2000 to 2999 2100 Accounts payable 2140 Notes payable 2150 Short-term Bank loan 2160 Corporate income taxes payable 2170 Worksafe BC payable 2180 PST payable 2215 El payable 222220 CPP payable 2225 Employee Income lax payable Subtotal Payroll deductions 28 CIST 2680 GST collecled on sales 2385 GST paid on purchases Subtotal GST payable 2400 Interest payable Total Current Liabilities Total Long Term Liabilities GRAND TOTAL LIABILITIES EQUITY ACCOUNTS 3000 to 3999 3350 Common shares Total Share capital 3500 Retained earnings Total Retained earnings GRAND TOTAL EQUITY REVENUE ACCOUNTS 4000 TO 4999 4210 Sales revenue 4220 Sales returns Subtotal Net Sales 4300 Dividend revenue 4460 Gain on sale assels Subtota? Other Revenue GRAND TOTAZ REVENUE EXPENSE ACCOUNTS 5000 TO 5999 5010 Purchases 5020 Purchases relurns 5030 Purchase discounts 5040 Cost of goods sold Subtotal Cost of Goods Sold 5620 Bad debts expense 5660 Depreciation expense 5885 Insurance expense 5740 Interest expense 5750 Rent expense 5780 Salaries and benefits expense 5770 Worksafe BC expense 57B0 Corporate Income tax expense Subtotal General & Operating Expenses GRAND TOTAL EXPENSES Gear Out There (GOT) Inc. Statement of Financial Position As at May 31, 2020 ASSETS $34,100 Current Assets Cash Accounts receivable Less: Allowance for doubtful accounts Inventory Total Current Assets $5,000 (1,000) 4,000 20.000 $58, 100 Property, Plant and Equipment Store equipment Less: Accumulated depreciation, equipment Land Total Property, Plant and Equipment $30,000 (9.000) 21,000 3,000 $24,000 TOTAL ASSETS $82 100 LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable PST payable GST payable Payroll liabilities Total Current Liabilities $ 7,500 1,000 500* 2380* $11,380 Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $10,000 60.720 $70,720 $82.100 *post this amount for June 1 opening balance to #2380 GST collected on sales **comprises #2215 El payable $135; #2220 CPP payable $370; #2225 Incomes tax payable $1875: #2170 Worksafe BC payable $200 The Chart of Accounts of Gear Out There (GOT) Inc. LASSET ACCOUNTS 1000 TO 1999 1080 Cash 11200 Accounts receivable 1205 Allowance for doubtful accounts Subtota Accounts receivable. Net 1300 Prepaid insurance 1301 Prepaid rent 1350 Inventory 1400 Investments Total Current Asses 1820 Equipment 1825 Accumulated Depreciation equipment Sublots! equipment. Net 1880 Land Subtotal Property. Plant, and Equipment. Nel Total Long Term Assets GRAND TOTAL ASSETS LIABILITIES ACCOUNTS 2000 to 2999 2100 Accounts payable 2140 Notes payable 2150 Short-term Bank loan 2160 Corporate income taxes payable 2170 Worksafe BC payable 2180 PST payable 2215 El payable 222220 CPP payable 2225 Employee Income lax payable Subtotal Payroll deductions 28 CIST 2680 GST collecled on sales 2385 GST paid on purchases Subtotal GST payable 2400 Interest payable Total Current Liabilities Total Long Term Liabilities GRAND TOTAL LIABILITIES EQUITY ACCOUNTS 3000 to 3999 3350 Common shares Total Share capital 3500 Retained earnings Total Retained earnings GRAND TOTAL EQUITY REVENUE ACCOUNTS 4000 TO 4999 4210 Sales revenue 4220 Sales returns Subtotal Net Sales 4300 Dividend revenue 4460 Gain on sale assels Subtota? Other Revenue GRAND TOTAZ REVENUE EXPENSE ACCOUNTS 5000 TO 5999 5010 Purchases 5020 Purchases relurns 5030 Purchase discounts 5040 Cost of goods sold Subtotal Cost of Goods Sold 5620 Bad debts expense 5660 Depreciation expense 5885 Insurance expense 5740 Interest expense 5750 Rent expense 5780 Salaries and benefits expense 5770 Worksafe BC expense 57B0 Corporate Income tax expense Subtotal General & Operating Expenses GRAND TOTAL EXPENSES

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions