Mark’s Music is a store that buys and sells musical instruments in Ontario, where the HST rate is 13%. Mark’s Music uses a perpetual inventory system and the earnings approach to revenue recognition. Transactions for the business are shown below: Nov. 2 Purchased 3 electric guitars from Fender Supply Limited, on account, at a cost of $800 each. 4 Made a cash sale of 2 keyboards for a total invoice price of $2,200 plus applicable taxes. The cost of each keyboard was $800. 5 Received a credit memorandum from Western Acoustic Inc. for the return of an acoustic guitar that was defective. The original invoice price before taxes was $700 and the guitar had been purchased on account. Mark’s Music intends to return the defective guitar to the original supplier. 7 One of the keyboards from the cash sale of November 4 was returned to the store for a full cash refund because the customer was not satisfied with the instrument. The keyboard, which cost $800, was returned to inventory. 8 Purchased supplies from a stationery store. The price of the supplies is $500 before all applicable taxes. 10 Sold one Omega trumpet to Regional Band, on account, for an invoice price of $4,600 before applicable taxes. The trumpet had cost Mark’s Music $2,750. 13 Purchased two saxophones from Yamaha Canada Inc. on account. The invoice price was $1,700 for each saxophone, excluding applicable taxes. 14 Collected $4,350 on account. The payment included all applicable taxes. 16 Returned to Yamaha Canada Inc. one of the saxophones purchased on November 13, as it was the wrong model. Received a credit memorandum from Yamaha for the full purchase price. 20 Made a payment on account for the amount owing to Fender Supply Limited for the purchase of November 2. Prepare the journal entries to record the Mark’s Music transactions.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mark’s Music is a store that buys and sells musical instruments in Ontario, where the HST rate is 13%. Mark’s Music uses a perpetual inventory system and the earnings approach to revenue recognition. Transactions for the business are shown below:

Nov.	2	Purchased 3 electric guitars from Fender Supply Limited, on account, at a cost of $800 each.
	4	Made a cash sale of 2 keyboards for a total invoice price of $2,200 plus applicable taxes. The cost of each keyboard was $800.
	5	Received a credit memorandum from Western Acoustic Inc. for the return of an acoustic guitar that was defective. The original invoice price before taxes was $700 and the guitar had been purchased on account. Mark’s Music intends to return the defective guitar to the original supplier.
	7	One of the keyboards from the cash sale of November 4 was returned to the store for a full cash refund because the customer was not satisfied with the instrument. The keyboard, which cost $800, was returned to inventory.
	8	Purchased supplies from a stationery store. The price of the supplies is $500 before all applicable taxes.
	10	Sold one Omega trumpet to Regional Band, on account, for an invoice price of $4,600 before applicable taxes. The trumpet had cost Mark’s Music $2,750.
	13	Purchased two saxophones from Yamaha Canada Inc. on account. The invoice price was $1,700 for each saxophone, excluding applicable taxes.
	14	Collected $4,350 on account. The payment included all applicable taxes.
	16	Returned to Yamaha Canada Inc. one of the saxophones purchased on November 13, as it was the wrong model. Received a credit memorandum from Yamaha for the full purchase price.
	20	Made a payment on account for the amount owing to Fender Supply Limited for the purchase of November 2.

Prepare the journal entries to record the Mark’s Music transactions.

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