Purchase Solution

Journal Entry - Alternative Ways of Recording Sales Tax

Not what you're looking for?

Ask Custom Question

In providing accounting services to small businesses, you encounter the following situations pertaining to cash sales.

Grainger Company rings up sales and sales taxes separately on its cash register. On April 10 the register totals are sales $25,000 and sales taxes $1,750.
Darby Company does not segregate sales and sales taxes. Its register total for April 15 is $13,780, which includes a 6% sales tax.
Prepare the entries to record the sales transactions and related taxes for (a) Grainger Company and (b) Darby Company. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

A) April 10 ~ Grainger Company
Account Description / Debit / Credit

B) April 15 ~ Darby Company
Account Description / Debit / Credit

Purchase this Solution
Solution Summary

This solution illustrates how to record sales tax collected under each alternative.

Solution Preview

Sales taxes are generally collected by retailers and remitted to a state and/or local government; therefore, the sales taxes collected are a liability of the retailer collecting them. Of course, the sales proceeds are revenues. The Grainger Company sales and related sales tax collected are segregated at the register, so the journal entry is straight-forward:

April 10 Cash 26,750
Sales revenue ...

Purchase this Solution
Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Operations Management

This quiz tests a student's knowledge about Operations Management

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • This post addresses sales tax in the state fund's financials

    470799 recording sales tax for large and small merchants A state requires large merchants (i.e., those with sales over a specified dollar amount) to report and remit their sales taxes within fifteen days of the end of each month.

  • Journal entry : Depreciation

    84320 Journal entry : Depreciation (3) During the month of June, Heather's Boutique had cash sales of $243,800 and credit sales of $137,800, both of which include the 6% sales tax that must be remitted to the state by July 15.

  • The Recording and Posting Processes

    Recording monthly depreciation, for example, is a general journal entry. The process of 'posting' occurs when the totals of the various journals are transferred or posted to the accounting codes of the organization.

  • Journalize the entries - Solomon Company

    Cash price: $38,500 Sales tax: $2,200 Shipping costs: $175 Insurance during shipping: $75 Installation and testing costs $50 Oil and lubricants: $90 Total cost: $41,090 Journal entry: Equipment purchased: +$41,090 2.

  • Journal Entries for July for Woodbury

    For the two sales, the cost of sale is included as part of the recording of the sales. That makes inventory correct and shows the cost on the income statement. 4.

  • Calcuating Net Pay After Various Deductions

    payable for $8,925 The solution explains the journal entry to be made for recording the net pay.

  • Journal entry for sales tax collected for Heather's Boutique

    70853 Journal entry for sales tax collected for Heather's Boutique During the month of June, Heather's Boutique had cash sales of $243,800 and credit sales of $137,800, both of which include the 6% sales tax that must be remitted to the state by July

  • Ten questions - financial accounting

    In its first year of operations Acme Corp. had income before tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%.

  • Recording of Credit Sales

    185500 Recording of Credit Sales The following transactions took place at Dave's Wildlife Resort during May. Indicate how these transactions would be entered in a sales journal like the one shown in figure 7.2.

View More Related Solutions