Questions for Class Discussion -- Chapter 11

Questions for Class Discussion -- Chapter 11 - COMMERCE 450...

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COMMERCE 450 FALL 2011 QUESTIONS FOR CLASS DISCUSSION CURRENT LIABILITIES AND CONTINGENCIES QUESTION 1 In January, its first month of operations, BC Ltd. purchases furniture and fittings at a cost of $10,000 and inventory for resale at a cost of $80,000. The company has sales of $100,000 from the sale of 75% of the items in inventory. (All amounts are before the calculation of sales taxes.) Required: Prepare journal entries to record these transactions and the payment of the sales taxes to the government under each of the following conditions: (a) Assume that these sales took place in January 2011 when the only sales tax is HST of 12%. (b) Assume that these sales took place in January 2014 after reimplementation of the PST/GST system with PST of 7% and GST of 5%. QUESTION 2 BC Ltd. purchased a delivery van on July 1 for a down payment of $10,000 plus $30,000 to be paid on June 30 of the following year. A note was issued for the $30,000 liability which was non-interest bearing. A reasonable market interest rate for such a note would be 6% for one year. (Ignore sales taxes.) Required: Prepare a journal entry to record the purchase of the delivery van and the adjusting entry necessary to record the interest on the note at the company’s December 31 year-end. QUESTION 3 On November 30, BC Ltd. issues a purchase order to acquire some inventory from an American supplier with payment to be made in US dollars. The cost of the inventory is US$80,000, half of
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This note was uploaded on 12/10/2011 for the course COMM 450 taught by Professor Jackes during the Spring '10 term at UBC.

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Questions for Class Discussion -- Chapter 11 - COMMERCE 450...

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