Reference no: EM133010253

Question - Prepare the necessary journal entries for the month of December 2020 for the following transactions of Resistance Inc. Resistance reports under ASPE. Round numbers to the nearest dollar wherever applicable. If no entry is required, write "No entry".

a) On December 1, 2020, Resistance borrowed $40,000 from the Bank of Nova Scotia, by signing a $48,536 non-interest bearing note due November 30, 2022.

b) During the month, cash sales of $1,228,000 were recorded, plus 13% HST.

c) Monthly payroll is $117,000; less EI, $3,800; CPP, $2,200; and income tax, $12,200. The employer portion of payroll taxes was also recorded

d) In addition to item (b) above, sales were made to a U.S. customer on account for US$176,000. There was no HST on the sale. The U.S. dollar was worth Cdn$1.03 on this date.

e) On December 7th, local residents sued the company for excess chemical emissions that caused some of them to seek medical attention. The total lawsuit is $2,000,000. The company's lawyers believe it is likely the lawsuit will be successful and that the amount to be paid to residents will be $500,000.

f) The sales in part (b) included a one-year warranty on parts and labour. The warranty is intended to assure customers that the products will operate as advertised. The warranty is estimated to cost of 2.5% of sales. Actual warranty work done during the month totalled $24,900 and was paid in cash to subcontractors. The warranty is not valid for U.S. customers.

g) The U.S. customer paid US$140,000 on account, when the U.S. dollar was worth $1.07. The remaining amount will be paid in January 2021.

h) Inventory was purchased on account for $1,520,000 plus 13% HST.

i) Any necessary adjusting journal entries at December 31, 2020 concerning any of items above. At December 31, 2020, the U.S. exchange rate was Cdn$1.06.