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Question 1 Fantastic Fashions has just completed its first quarter of operations. Below are transactions that have not...

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Accounting

Question 1

Fantastic Fashions has just completedits first quarter of operations. Below are transactions that havenot yet been recorded. Prepare the journal entries listedbelow.

      

      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 amountsowing on account to Trendy Taste Inc. Interest is 6% annually anddue 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 thisamount $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 damageswill be awarded.

      Jun 1     Paid the property taxes bill in full.

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 madequarterly beginning Mar 1. Below is an instalment schedule forWonder 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 nearestdollar).

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

Answer & Explanation Solved by verified expert
3.8 Ratings (390 Votes)

Question 1 :

In the books of Fantastic Fashions:

Date Account Titles Debit Credit
$ $
Jan 1 Cash 84,750
HST Payable 9,750
Sales 75,000
Jan 15 Cash 12,000
Notes Payable 12,000
Mar 1 Property Tax Expense 7,500
Accounts Payable 7,500
Apr. 1 Salaries Expense 10,000
CPP Payable 495
EI Payable 178
Income Taxes Payable 3,465
Cash 5,862
April 15 Interest Expense 180
Notes Payable 12,000
Cash 12,180
Apr. 29 No journal entry required 0 0
June 1 Accounts Payable 7,500
Cash 7,500

Question 2 :

a.

Interest Period Interest Payment Interest Expense Reduction of Principal Principal
Jan 1 $300,000
Mar 1 8,375 3,375 5,000 295,000
June 1 8,320 3,320 5,000 290,000
Sept 1 8,263 3,263 5,000 285,000
Dec 1 8,206 3,206 5,000 280,000

b.

Date Account Titles Debit Credit
$ $
Mar 1 Interest Expense 3,375
Notes Payable 5,000
Cash 8,375
Sep 1 Interest Expense 3,263
Notes Payable 5,000
Cash 8,263

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Transcribed Image Text

Question 1Fantastic Fashions has just completedits first quarter of operations. Below are transactions that havenot yet been recorded. Prepare the journal entries listedbelow.            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 amountsowing on account to Trendy Taste Inc. Interest is 6% annually anddue 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 thisamount $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 damageswill be awarded.      Jun 1     Paid the property taxes bill in full.Question 2On January 1, Wonder Water borrowed $300,000 for 5 years at 4.5%to finance expansion. Fixed Principal Payments are to be madequarterly beginning Mar 1. Below is an instalment schedule forWonder Water.WONDER WATERINSTALMENT PAYMENT SCHEDULE- FIXED PRINCIPAL PAYMENTSInterest PeriodCash PmtInterest ExpenseReduction of PrincipalPrincipalJan 1300,000Mar 1?3,3755,000295,000Jun 18,320?5,000?Sep 1?3,263?285,000Dec 1??5,000?Instructions(a) Determine the missing values (round to the nearestdollar).(b) Prepare the journal entries for the payments made on March 1and Sept 1.

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