Prepare the journal entries for the above events for the month of February 2022 in the General Journal below. GST needs to be accounted for. Narrations are not required.
Prepare the journal entries for the above events for the month of February 2022 in the General Journal below. GST needs to be accounted for. Narrations are not required.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Hill Riders is a local bicycle shop retailing and servicing mountain bikes. The following information
pertains to the business for the month of February 2022.
On February 1, Hill Riders purchased additional equipment for $23,100 (GST-inclusive). The
equipment was delivered on February 1 and the business paid 40% of that amount on the
same day. Hill Riders paid the remaining amount on February 20.
Hill Riders started using equipment purchased on February 1 from the day of purchase. The
management believes the equipment will last for seven years. By the end of February, no
depreciation on that equipment had been recorded for the month.
Hill Riders received $18,700 (GST-inclusive) on January 29 for bike servicing to be provided in
February and March 2022. By the end of February, 60% of services had been provided.
At the end of January 2022, Hill Riders recorded gross wages of $13,000 of which $4,300 was
a PAYG withholding. The rest was payable to employees. On February 5, Hill Riders paid the
outstanding amount to employees from the January transaction.
Required:
Prepare the journal entries for the above events for the month of February 2022 in the General
Journal below. GST needs to be accounted for. Narrations are not required.
Account titles (Details)
Cr ($)
Date
Dr ($)
Expert Solution
Step 1
Journal entry is the basic entry and as well the first entry which is recorded journal book of the company.
The GST which is the goods and service tax is the 10% in the country which is the Australia.
Computation of cost of the equipment without GST
Cost of equipment exclude GST = (Purchase Price with GST / 100 + GST Rate) * 100
Cost of equipment exclude GST = ($23,100 / 100 + 10) * 100
Cost of equipment exclude GST = ($23,100 / 110) * 100
Cost of equipment exclude GST = $210 * 100
Cost of equipment exclude GST = $21,000
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