Question

Far and Wide Broadband provides Internet connection services to customers living in remote areas. During February 2020 , Internet services were sold, on credit, to a customer for $181,000 before taxes. The customer must also pay the following taxes on these charges: 8. State of Kansas sales tax of 6% b. Federal excise tax of 0.2% c. State of Kansas excise tax of 0.4% Required: Assuming Far and Wide collects these toxes from the customer, what joumal entry would Far and Wide make to record the sale? If an smount box does not require an entry, leave it blank.

Answer 1

To record the sale of Internet services, Far and Wide Broadband would make a journal entry that includes debiting Accounts Receivable and crediting Sales Revenue. They would also credit separate accounts for State of Kansas Sales Tax Payable, Federal Excise Tax Payable, and State of Kansas Excise Tax Payable, based on the percentages specified.

Step-by-step explanation:

They would also credit separate accounts for State of Kansas Sales Tax Payable, Federal Excise Tax Payable, and State of Kansas Excise Tax Payable, based on the percentages specified. The journal entry that Far and Wide Broadband would make to record the sale of Internet services, including taxes, would be as follows:

1. Debit Accounts Receivable for $181,000
2. Credit Sales Revenue for $181,000 (the net amount)
3. Credit State of Kansas Sales Tax Payable for $10,860 (6% of $181,000)
4. Credit Federal Excise Tax Payable for $362 (0.2% of $181,000)
5. Credit State of Kansas Excise Tax Payable for $724 (0.4% of $181,000)