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

JOURNALIZING SALES, SALES RETURNS AND ALLOWANCES, AND CASH RECEIPTS Prepare journal entries for the following transactions.   

Aug.    4 Sold merchandise on account to S. Miller for $320 plus sales tax of 4%, with 2/10, n/30 cash discount terms.
    6 Sold merchandise on account to K. Krtek for $210 plus sales tax of 4%.
    10 S. Miller returned merchandise purchased on August 4 for $20 plus sales tax for credit.
   
Aug.    13 S. Miller paid the balance due on her account.
    15 K. Krtek returned merchandise purchased on August 6 for $40 plus sales tax for credit.
    20 K. Krtek paid the balance due on his account.

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 August 4:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
August4Accounts Receivable, SM332.80
Sales320.00
Sales Tax Payable12.80
(Record credit sale)

Table (1)

Description:

  • Accounts Receivable, SM 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= $320×4%= $12.80

Working Note 2:

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

Accounts receivable, SM = Sales+Sales tax payable= $320.00+$12.80= $332.80

Transaction on August 6:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
August6Accounts Receivable, KK218.40
Sales210.00
Sales Tax Payable8.40
(Record credit sale)

Table (2)

Description:

  • Accounts Receivable, KK 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= $210×4%= $8.40

Working Note 4:

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

Accounts receivable, KK = Sales+Sales tax payable= $210.00+$8.40= $218.40

Transaction on August 10:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
August10Sales Returns and Allowances20.00
Sales Tax Payable0.80
Accounts Receivable, SM20.80
(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, SM 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= $20×4%= $0.80

Working Note 6:

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

Accounts receivable = Sales returns+Sales tax payable= $20.00+$0.80= $20.80

Transaction on August 13:

DateAccount Titles and ExplanationsPost

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

Explain how absolute advantage and comparative advantage differ.

Principles of Microeconomics (MindTap Course List)

What are the major types of teams?

Foundations of Business (MindTap Course List)

How are project classifications used in the capital budgeting process?

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