EXERCISE 11.

POOLE SUPPLIERS
Apr. 10 Cash ............................................................... 31,500
Sales Revenue ....................................... 30,000
Sales Taxes Payable .............................. 1,500

WATERMAN AQUATICS
15 Cash ............................................................... 25,680
Sales Revenue (₤25,680 ÷ 1.07) ............ 24,000
Sales Taxes Payable
(₤25,680 – ₤24,000)............................. 1,680

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EXERCISE 11.4

(a) June 30
Sales Revenue ......................................................... 23,700
Sales Taxes Payable .................................... 23,700
Computation:
Sales plus sales tax (₤265,000
+ ₤153,700) .............................................₤418,700
Sales exclusive of tax (₤418,700
÷ 1.06) .....................................................(395,000)
Sales tax .....................................................₤ 23,700

(b) If the adjusting entry related to a VAT rather than sales tax, it would be
recorded as follows:

Sales Revenue.................................................................
23,700
Value Added Taxes Payable .................................. 23,700

EXERCISE 11.5

(a) Nov. 30 Cash .......................................................... 300,000

Unearned Subscription Revenue
(15,000 X €20) ................................ 300,000

(b) Dec. 31 Unearned Subscription Revenue ............ 25,000

Subscription Revenue
(€300,000 X 1/12) ........................... 25,000

(c) Mar. 31 Unearned Subscription Revenue ............. 75,000

Subscription Revenue
(€300,000 X 3/12) ............................ 75,000

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SOLUTIONS TO PROBLEMS

PROBLEM 11.1

(a) Jan. 5 Cash ........................................................... 20,520

Sales Revenue (NT$20,520 ÷ 108%) . 19,000
Sales Taxes Payable
(NT$20,520 – NT$19,000)............... 1,520

12 Unearned Service Revenue ...................... 10,000

Service Revenue ............................... 10,000

14 Sales Taxes Payable ................................. 7,700

Cash ................................................... 7,700

20 Accounts Receivable ................................ 48,600

Sales Revenue ................................... 45,000
Sales Taxes Payable
(900 X NT$50 X 8%) ....................... 3,600

21 Cash ........................................................... 27,000

Notes Payable.................................... 27,000

25 Cash ........................................................... 12,420

Sales Revenue (NT$12,420 ÷ 108%) . 11,500
Sales Taxes Payable
(NT$12,420 – NT$11,500)............... 920

(b) (1) Jan. 31 Interest Expense ............................... 60

Interest Payable ......................... 60
(NT$27,000 X 8% X 1/12 =
(N NT$180; NT$180 X 1/3)

(2) Jan. 31 Warranty Expense

(NT$45,000 X 7%)........................... 3,150
Warranty Liability ...................... 3,150

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PROBLEM 11.1 (Continued)

(c) Current liabilities

Notes payable ................................................................... NT$27,000
Accounts payable............................................................. 52,000
Unearned service revenue (NT$16,000 – NT$10,000)..... 6,000
Sales taxes payable (NT$1,520 + NT$3,600 + NT$920) .. 6,040
Warranty liability .............................................................. 3,150
Interest payable ................................................................ 60
Total current liabilities.............................................. NT$94,250

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 PROBLEM 11.2

(a) Jan. 2 Inventory .................................................. 30,000

Accounts Payable ............................ 30,000

Feb. 1 Accounts Payable ................................... 30,000

Notes Payable .................................. 30,000

Mar. 31 Interest Expense

(₩30,000 X 9% X 2/12) ......................... 450
Interest Payable ............................... 450

Apr. 1 Notes Payable .......................................... 30,000

Interest Payable ....................................... 450
Cash.................................................. 30,450

July 1 Equipment................................................ 71,000

Cash.................................................. 11,000
Notes Payable .................................. 60,000

Sept. 30 Interest Expense

(₩60,000 X 10% X 3/12) ....................... 1,500
Interest Payable ............................... 1,500

Oct. 1 Notes Payable .......................................... 60,000

Interest Payable ....................................... 1,500
Cash.................................................. 61,500

Dec. 1 Cash ......................................................... 24,000

Notes Payable .................................. 24,000

Dec. 31 Interest Expense

(₩24,000 X 8% X 1/12) ......................... 160
Interest Payable ............................... 160

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PROBLEM 11.2 (Continued)

(b)
Notes Payable
4/1 30,000 2/1 30,000
10/1 60,000 7/1 60,000
12/1 24,000
12/31 Bal. 24,000

Interest Payable
4/1 450 3/31 450
10/1 1,500 9/30 1,500
12/31 160
12/31 Bal. 160

Interest Expense
3/31 450
9/30 1,500
12/31 160
12/31 Bal. 2,110

(c) Current liabilities

Notes payable ................................................. ₩24,000
Interest payable .............................................. 160 ₩24,160

(d) Total interest is ₩2,110.

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