Q14E - Horngren'S Financial And Managerial Accounting

Question

Consider the following transactions of Sapphire Software: Mar. 31 Recorded cash sales of $230,000, plus sales tax of 7% collected for the state of New Jersey. Apr. 6 Sent March sales tax to the state. Journalize the transactions for the company. Ignore cost of goods sold.

Step-by-Step Solution

Answer

• Cash is debited with $246,100. Sales revenue and tax payable credited with $230,000 and $16,100.
• Sales tax payable debited with $16,100 and cash is credited with $16,100.

Step 1: Calculation of sales tax

$\begin{array}{c}\mathrm{Sales} \mathrm{Tax} \mathrm{Payable}=\mathrm{Sales}\times \mathrm{Tax} \mathrm{Rate}\\ =\mathrm{\$}230,000\times 7\mathrm{\%}\\ =\mathrm{\$}16,100\end{array}$

Step 2: Journal entry:

Date	Accounts and explanation	Debit	Credit
March 31	Cash	$246,100
	Sales revenue		$230,000
	Sales tax payable		$16,100
	(To record cash sales and sales tax. payable)
April 6	Sales tax payable	$16,100
	Cash		$16,100
	(To record cash payment for sales tax payable.)