Question 2
The following are a selection of journal entries that Wine About It! Inc., an incorporated company owning three craft wine stores, recorded in February 2022. Wine About It! Inc. is in a province where GST is 5% and PST is 8%. The employee's CPP rate is 5.25% of earnings and the employee's El rate is 1.58% of earnings. The employer's share is equal to 100% of the employee's share of CPP and 140% of employee's share of El. No accruals for property taxes have been recorded yet in the company's current fiscal year which ends on December 31. A bank loan was taken out January 1, with the following details: Loan principal $150,000; Term of 5 years; Interest Rate of 5% and blended instalment payments of $2,831/month. Indicate which of the entries below were correctly recorded. a. Feb. 4 Cash 113 Sales 100 Sales Tax Payable 13 Cash sale of $100 O b. Feb. 10 Interest Expense 2,400 Interest Payable 2,400 To accrue interest for the month ending Feb 10 on $40,000 note taken out on Jan 10 at 6% interest. Principal and interest due July 10. C. Feb. 15 Salary Expense 4,000 CPP Payable 210 Employee Income Tax Payable 825 Salaries Payable 2,965 Record pay to employees. d. Feb. 15 Employee Benefits Expense 398.48 CPP Payable 210.00 El Payable 88.48 Recorded employee benefits for February 15th pay. e. Feb.27 Property Tax Expense 520 Property Tax Payable 520 Received invoice for property taxes for the calendar year, payable June 30. ($3,120 x 2 /12) f. Feb.28 Cash 910 Sales Tax Payable 910 Payment of GST and PST totaling $350 and $560, respectively, to the federal and provincial governments. g. Feb. 28 Interest Expense 625 Bank Loan Payable 2,206 Cash 2,831 To record second instalment payment on the bank loan. The following partial instalment schedule was prepared for Navy Blue Ltd. related to its loan that was taken out on December 1, 2022. Navy Blue Ltd. Instalment Payment Schedule Blended Payments (a) Cash Payment (b) Interest Expense (c) Reduction of Principal (d) Principal Balance Interest Period December 1, 2022 $75,000.00 January 1, 2023 $1,449.96 $375.00 $1,074.96 73,925.04 February 1, 2023 1,449.96 369.63 1,080.33 72,884.70 March 1, 2023 1,449.96 364.22 1,085.74 71,758.97 April 1, 2023 1,449.96 358.79 1,091.17 70,667.80 May 1, 2023 1,449.96 353.34 1,096.62 69,571.18 June 1, 2023 1,449.96 347.86 1,102.10 68,469.08 Select which of the statements are correct: O a. The term of the loan cannot be determined with the information provided. b. The interest rate on the loan is 6% per annum. c. For September 1, 2023, the total payment will be $1,449.96. d. The interest portion for the instalment payment of August 1, 2023 will be $331.24. e. Principal payment for December 1, 2023 will be $1,135.58. f. The balance of the loan after the January 1, 2024 payment will be $60,598.50. g. The journal entry to record the payment of principal and interest for April 1, 2023 will include a debit to Interest Expense for $358.80 and a debit to Loan Payable for $1,449.96. The following are a selection of journal entries that Wine About It! Inc., an incorporated company owning three craft wine stores, recorded in February 2022. Wine About It! Inc. is in a province where GST is 5% and PST is 8%. The employee's CPP rate is 5.25% of earnings and the employee's El rate is 1.58% of earnings. The employer's share is equal to 100% of the employee's share of CPP and 140% of employee's share of El. No accruals for property taxes have been recorded yet in the company's current fiscal year which ends on December 31. A bank loan was taken out January 1, with the following details: Loan principal $150,000; Term of 5 years; Interest Rate of 5% and blended instalment payments of $2,831/month. Indicate which of the entries below were correctly recorded. a. Feb. 4 Cash 113 Sales 100 Sales Tax Payable 13 Cash sale of $100 O b. Feb. 10 Interest Expense 2,400 Interest Payable 2,400 To accrue interest for the month ending Feb 10 on $40,000 note taken out on Jan 10 at 6% interest. Principal and interest due July 10. C. Feb. 15 Salary Expense 4,000 CPP Payable 210 Employee Income Tax Payable 825 Salaries Payable 2,965 Record pay to employees. d. Feb. 15 Employee Benefits Expense 398.48 CPP Payable 210.00 El Payable 88.48 Recorded employee benefits for February 15th pay. e. Feb.27 Property Tax Expense 520 Property Tax Payable 520 Received invoice for property taxes for the calendar year, payable June 30. ($3,120 x 2 /12) f. Feb.28 Cash 910 Sales Tax Payable 910 Payment of GST and PST totaling $350 and $560, respectively, to the federal and provincial governments. g. Feb. 28 Interest Expense 625 Bank Loan Payable 2,206 Cash 2,831 To record second instalment payment on the bank loan. The following partial instalment schedule was prepared for Navy Blue Ltd. related to its loan that was taken out on December 1, 2022. Navy Blue Ltd. Instalment Payment Schedule Blended Payments (a) Cash Payment (b) Interest Expense (c) Reduction of Principal (d) Principal Balance Interest Period December 1, 2022 $75,000.00 January 1, 2023 $1,449.96 $375.00 $1,074.96 73,925.04 February 1, 2023 1,449.96 369.63 1,080.33 72,884.70 March 1, 2023 1,449.96 364.22 1,085.74 71,758.97 April 1, 2023 1,449.96 358.79 1,091.17 70,667.80 May 1, 2023 1,449.96 353.34 1,096.62 69,571.18 June 1, 2023 1,449.96 347.86 1,102.10 68,469.08 Select which of the statements are correct: O a. The term of the loan cannot be determined with the information provided. b. The interest rate on the loan is 6% per annum. c. For September 1, 2023, the total payment will be $1,449.96. d. The interest portion for the instalment payment of August 1, 2023 will be $331.24. e. Principal payment for December 1, 2023 will be $1,135.58. f. The balance of the loan after the January 1, 2024 payment will be $60,598.50. g. The journal entry to record the payment of principal and interest for April 1, 2023 will include a debit to Interest Expense for $358.80 and a debit to Loan Payable for $1,449.96
