1TI - Horngren'S Financial And Managerial Accounting

Question

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.

Step-by-Step Solution

Answer

Sales tax payable will be debited with $160.

Sales tax payable

$\begin{array}{c}\text{4\%\hspace{0.17em}Sales tax payble = rate }\times \text{inventory}\\ \text{=\hspace{0.17em}}\frac{4}{100}\times \$4,000\\ =\$160\end{array}$

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)