Question

Listed below are selected transactions of Sage Department Store for the current year ending December 31.

a. On December 5, the store received $520 from the Selig Players as a deposit to be returned after certain furniture to be used in stage production was returned on January 15.
b. During December, cash sales totaled $823,200, which includes the 5% sales tax that must be remitted to the state by the fifteenth day of the following month.
c. On December 10, the store purchased for cash three delivery trucks for $115,700. The trucks were purchased in a state that applies a 5% sales tax.
d. The store determined it will cost $102,800 to restore the area (considered a land improvement) surrounding one of its store parking lots, when the store is closed in 2 years. Ayayai estimates the fair value of the obligation at December 31 is $90,600.

Required:
Prepare all the journal entries necessary to record the transactions noted above as they occurred and any adjusting journal entries relative to the transactions that would be required to present fair financial statements at December 31.

Answer 1

Answer is explained in the explanation section below.

Step-by-step explanation:

We are asked to prepare the journal entries:

Following are the prepared journal entries necessary to record the transactions.

S.No. Account Titles and Explanation Debit Credit

1. Cash $520

Due from Customer $520

2. Cash $823,200

Sales ( $823,200/105%) $784000

Sales Tax Payable ($784000 x 5%) $39200

3. Truck ( $115,700 x 105%) $121485

Cash $121485

4. Land Improvements $90,600

Asset Retirement Obligation $90600

Above are the required journal entries for this question.