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Chapter 11: 1TI (page 578)

On August 10, Swanson Company recorded sales of merchandise inventory on account, \(4,000. The sales were subject to sales tax of 4%. The company uses the perpetual inventory system. On September 30, Swanson paid \)500 of sales tax to the state.

1. Journalize the transaction to record the sale on August 10. Ignore cost of goods sold.

Short Answer

Expert verified

Sales tax payable will be debited with $160.

Step by step solution

01

Sales tax payable

4% Salestaxpayble=rate×inventory= 4100×$4,000=$160

02

Journal entries

Date

Particulars

Debit

Credit

Augast 10,

Cash

$4,160

Sales revenue

$4,000

Sales tax payble 4%

$160

(Being entry for cash sales and tax payable)

Sept, 30

Sales tax payble

$160

Cash

$160

(To record cash payement for tax payable)

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Most popular questions from this chapter

On December 31, Weston Company estimates that it will pay its employees a 5% bonus on net income after deducting the bonus. The company reports net income of $64,000 before the calculation of the bonus. The bonus will be paid on January 15 of the next year.Requirements

1. Journalize the December 31 transaction for Weston.

2. Journalize the payment of the bonus on January 15.

The following transactions of Belkin Howe occurred during 2018:

Apr. 30 Howe is party to a patent infringement lawsuit of \(230,000. Howe’s attorney is certain it is remote that Howe will lose this lawsuit.

Jun. 30 Estimated warranty expense at 3% of sales of \)390,000.

Jul. 28 Warranty claims paid in the amount of \(6,300.

Sep. 30 Howe is party to a lawsuit for copyright violation of \)90,000. Howe’s attorney advises that it is probable Howe will lose this lawsuit. The attorney estimates the loss at \(90,000.

Dec. 31 Howe estimated warranty expense on sales for the second half of the year of \)520,000 at 3%.

Requirements

1. Journalize required transactions, if any, in Howe’s general journal. Explanations are not required.

2. What is the balance in Estimated Warranty Payable assuming a beginning balance of $0?

What is the difference between gross pay and net pay?

Runner guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 5% of sales. Assume that the Trail Runner dealer in Colorado Springs made sales totaling \(600,000 during 2018. The company received cash for 20% of the sales and notes receivable forthe remainder. Warranty payments totaled \)10,000 during 2018.

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Record the sales, warranty expense, and warranty payments for the company.

Ignore cost of goods sold.

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