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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Sales and Excise Tax

Garner’s Antique Hot Rods recently sold a 1957 Chevy for $75,000 on account. The state sales tax is 6%, and there is a $500-per-car federal excise tax.

Required:

Prepare the journal entry to record the sale.

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

To prepare:

The journal entry to record the sale.

Explanation

The journal entry to record the sale is explained as follows:

Journal Entries
Date Account Titles Debit Credit
Accounts Receivable $ 156,560,000

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