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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

SALES TRANSACTIONS T. M. Maxwell owns a retail business and made the following sales on account during the month of July 20--. There is a 5% sales tax on all sales.

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REQUIRED

  1. 1. Record the transactions starting on page 15 of a general journal.
  2. 2. Post from the journal to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.

1.

To determine

Journalize the transactions related to sales transactions.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the transactions related to sales transactions.

Transaction on July 1:

Page: 15
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
July1Accounts Receivable, Incorporation S122/✓1,260 
   Sales401 1,200
   Sales Tax Payable231 60
  (Record credit sale)   

Table (1)

Description:

  • Accounts Receivable, Incorporation S is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
  • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
  • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 1:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $1,200×5%= $60

Working Note 2:

Compute accounts receivable amount (Refer to Working Note 1 for value of sales tax payable).

Accounts receivable, Incorporation S} = Sales+Sales tax payable= $1,200+$60= $1,260

Transaction on July 8:

Page: 15
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
July8Accounts Receivable, VW122/✓2,205 
   Sales401 2,100
   Sales Tax Payable231 105
  (Record credit sale)   

Table (2)

Description:

  • Accounts Receivable, VW is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
  • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
  • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 3:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $2,100×5%= $105

Working Note 4:

Compute accounts receivable amount (Refer to Working Note 3 for value of sales tax payable).

Accounts receivable, VW= Sales+Sales tax payable= $2,100+$105= $2,205

Transaction on July 15:

Page: 15
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
20--    
July15Accounts Receivable, Manufacturing D122/✓4,515 
   Sales401 4,300
   Sales Tax Payable231 215
  (Record credit sale)   

Table (3)

Description:

  • Accounts Receivable, Manufacturing D is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
  • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
  • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 5:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $4,300×5%= $215

Working Note 6:

Compute accounts receivable amount (Refer to Working Note 5 for value of sales tax payable).

Accounts receivable, Manufacturing D} = Sales+Sales tax payable= $4,300+$215= $4,515

Transaction on July 21:

Page: 15
DateAccount Titles and ExplanationPost Ref

2.

To determine

Post the journalized entries into the accounts of the general ledger, and the customer accounts in accounts receivable ledger.

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