Question 1

Fantastic Fashions has just completed its first quarter of operations. Below are transactions that have not yet been recorded. Prepare the journal entries listed below.

Jan 1 Pre-tax cash sales amounted to $75,000. HST is collected on all sales at a rate of 13%.

Jan 15 Signed a three month note for $12,000 to extend amounts owing on account to Trendy Taste Inc. Interest is 6% annually and due at maturity.

Mar 1 Received the annual property tax bill for $7,500 payable on June 1.

Apr 1 Paid salaries of $10,000; of this amount $495 is CPP, $178 is EI and $3,465 is for income taxes (record the employer portion as well).

Apr 15 Paid the note due.

Apr 29 A customer sued Fantastic Fashions for $200,000. Legal counsel has advised that it is unlikely damages will be awarded.

Jun 1 Paid the property taxes bill in full.

Instructions

Prepare the journal entries listed above.

Question 2

On January 1, Wonder Water borrowed $300,000 for 5 years at 4.5% to finance expansion. Fixed Principal Payments are to be made quarterly beginning Mar 1. Below is an installment schedule for Wonder Water.

WONDER WATER

INSTALMENT PAYMENT SCHEDULE- FIXED PRINCIPAL PAYMENTS

Interest Period	Cash Pmt	Interest Expense	Reduction of Principal	Principal
Jan 1				300,000
Mar 1	?	3,375	5,000	295,000
Jun 1	8,320	?	5,000	?
Sep 1	?	3,263	?	285,000
Dec 1	?	?	5,000	?

Instructions

(a) Determine the missing values (round to the nearest dollar).

(b) Prepare the journal entries for the payments made on March 1 and Sept 1.