Chen Wholesalers Ltd. incurred the following transactions related to current liabilities — Chen's cash register showed totals end day March pre-tax sales 000 GST

Chen Wholesalers Ltd. incurred the following transactions related to current liabilities.

1. Chen's cash register showed the following totals at the end of the day on March 17: pre-tax sales $50,000; GST $2,500; and PST $3,500.

2. Chen received its property tax bill for the calendar year for $52,800 on May 1, payable July 1.

3. Chen's gross payroll for the week of August 15 was $81,000. The company deducted $4,010 for CPP, $1,442 for EI, $6,400 for pension, and $16,020 for income tax from the employees' pay. Chen's payroll costs for the week were $4,010 for CPP and $2,019 for EI.

4. On October 1, Chen borrowed $100,000 from First Bank for a six-month period; 4% interest on the bank loan is payable the first of each month.

Instructions

(a) Record the above transactions.

(b) Assuming that Chen's year end is December 31 and that it makes adjusting entries annually, prepare any adjusting entries required for the property tax in transaction 2 and the interest in transaction 4.

SOLUTION

(a)

Mar. 17 Cash 56,000

Sales 50,000

Sales Tax Payable ($2,500 + $3,500) 6,000

May 1 Property Tax Expense ($52,800 ÷ 12 × 4) 17,600

Property Tax Payable 17,600

July 1 Property Tax Expense ($52,800 ÷ 12 × 2) 8,800

Prepaid Property Tax ($52,800 ÷ 12 × 6) 26,400

Property Tax Payable 17,600

Cash 52,800