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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

JOURNALIZING SALES TRANSACTIONS Enter the following transactions in a general journal. Use a 5% sales tax rate.

Sept. 1 Sold merchandise on account to K. Smith, $1,800 plus sales tax. Sale No. 228.
  3 Sold merchandise on account to J. Arnes, $3,100 plus sales tax. Sale No. 229.
  5 Sold merchandise on account to M. Denison, $2,800 plus sales tax. Sale No. 230.
  7 Sold merchandise on account to B. Marshall, $1,900 plus sales tax. Sale No. 231.

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 September 1:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
September1Accounts Receivable, KS1,890
Sales1,800
Sales Tax Payable90
(Record credit sale)

Table (1)

Description:

  • Accounts Receivable, KS 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= $1,800×5%= $90

Working Note 2:

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

Accounts receivable, KS = Sales+Sales tax payable= $1,800+$90= $1,890

Transaction on September 3:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
September3Accounts Receivable, JA3,255
Sales3,100
Sales Tax Payable155
(Record credit sale)

Table (2)

Description:

  • Accounts Receivable, JA 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= $3,100×5%= $155

Working Note 4:

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

Accounts receivable, JA = Sales+Sales tax payable= $3,100+$155= $3,255

Transaction on September 5:

DateAccount Titles and ExplanationPost Ref

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