Question

Quinn Ltd paid $460 including GST (the GST rate of 15% is used), for advertising. Quinn Ltd is registered for GST purposes. The entry to record this transaction is:

Select one:
a. Debit Advertising $460, Credit GST Paid $60 and Cash $400.
b. Debit Advertising $460, Credit Cash $460.
c. Debit Advertising $460 and GST $69, Credit Cash $529.
d. Debit Advertising $400 and GST Paid $60, Credit Cash $460.

Answer 1

The entry to record this transaction is Option D: Debit Advertising $400 and GST Paid $60, Credit Cash $460.

Step-by-step explanation:

The entry to record this transaction is Option D: Debit Advertising $400 and GST Paid $60, Credit Cash $460.

Since the company is registered for GST purposes, it needs to separate the GST component from the total payment. The total payment of $460 includes $60 of GST. The advertising expense is recorded with a debit of $400, the GST paid is recorded with a debit of $60, and the cash payment is recorded with a credit of $460.

The journal entry can be written as: Debit Advertising $400, Debit GST Paid $60, Credit Cash $460.