BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

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

Enter the following transactions in a general journal:

June 4    Sold merchandise on account to T. Allen, $1,500 plus 6% sales tax, with 1/10, n/30 cash discount terms.

    7 Sold merchandise on account to K. Bryant, $1,800 plus 6% sales tax, with 1/10, n/30 cash discount terms.

    11 T. Allen returned merchandise totaling $300 from the June 4 sale, for credit.

    14 T. Allen paid the balance due from the June 4 sale, less discount.

    17 K. Bryant paid the balance due from the June 7 sale, less discount.

To determine

Journalize the transactions related to sales, sales return and allowances, and cash receipts.

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, sales return and allowances, and cash receipts.

Transaction on June 4:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June4Accounts Receivable, TA 1,590 
   Sales  1,500
   Sales Tax Payable  90
  (Record credit sale)   

Table (1)

Description:

  • Accounts Receivable, TA 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= $1,500×6%= $90

Working Note 2:

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

Accounts receivable, TA = Sales+Sales tax payable= $1,500+$90= $1,590

Transaction on June 7:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June7Accounts Receivable, KB 1,908 
   Sales  1,800
   Sales Tax Payable  108
  (Record credit sale)   

Table (2)

Description:

  • Accounts Receivable, KB 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= $1,800×6%= $108

Working Note 4:

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

Accounts receivable, KB = Sales+Sales tax payable= $1,800+$108= $1,908

Transaction on June 11:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June11Sales Returns and Allowances 300 
  Sales Tax Payable 18 
   Accounts Receivable, TA  318
  (Record merchandise returned)   

Table (3)

Description:

  • Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
  • Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
  • Accounts Receivable, TA is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Working Note 5:

Compute sales tax payable amount.

Sales tax payable = Sales returns×Sales tax percentage= $300×6%= $18

Working Note 6:

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

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Describe and compare risks and opportunities.

Accounting Information Systems

What are internal controls designed to do?

College Accounting (Book Only): A Career Approach

PORTFOLIO BETA An individual has 35,000 invested in a stock with a beta of 0.8 and another 40,000 invested in a...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)