Q27PGA

Question

The following transactions of Plymouth Pharmacies occurred during 2017 and 2018:

2017

Jan. 9 Purchased computer equipment at a cost of \(12,000, signing a six-month, 9% note payable for that amount.

29 Recorded the week’s sales of \)63,000, three-fourths on credit and onefourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.

Feb. 5 Sent the last week’s sales tax to the state.

Jul. 9 Paid the six-month, 9% note, plus interest, at maturity.

Aug. 31 Purchased merchandise inventory for \(9,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.

Dec. 31 Accrued warranty expense, which is estimated at 4% of sales of \)609,000.

31 Accrued interest on all outstanding notes payable.

2018

Feb. 28 Paid the six-month 10% note, plus interest, at maturity.

Journalize the transactions in Plymouth’s general journal. Explanations are not required. Round to the nearest dollar.

Step-by-Step Solution

Verified

Answer

Credit Sales Amount: $50,085

Cash Sales Amount: $16,695

1Step 1: Journal entries

2Step 2: Working notes

$Computation of sales tx = Sales Revenue \times Sales tax rate = $ 63, 000 \times \frac{6}{100} = $ 3, 780$

$Credit Sales Amount = (sales revenue + Sales Tax) \times \frac{3}{4} = ($ 63, 000 + $ 3, 780) \times \frac{3}{4} = $ 50, 085$

$Cash Sales Amount = (Sales revenue + Sales Tax) \frac{1}{4} = ($ 63, 000 + $ 3, 780) \times \frac{1}{4} = $ 16, 695$

$Interest expense of 9 % Notes payable = Notes payable Amount \times Rate \times \frac{No . of months}{12} = $ 12, 000 \times \frac{9}{100} \times \frac{6}{12} = $ 540$

$Interest expense of 10 % Notes payable = Notes payable Amount \times Rate \times \frac{No . of months}{12} = $ 9, 000 \times \frac{10}{100} \times \frac{6}{12} = $ 450$

Q26PGA

Q28PGA

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