Question

On July 15, Piper Company sold $10,000 of merchandise (costing $5,000) for cash. The sales tax rate is 4%. On August 1, Piper sent the sales tax collected from the sale to the government.

On November 3, the Milwaukee Bucks sold a six-game pack of advance tickets for $300 cash. On November 20, the Bucks played the first game of the six-game pack (this represented one-sixth of the advance ticket sales).

Record entries for the July 15 and August 1 transactions.
Record the entries for the November 3 and November 20 transactions.

Answer 1

Certainly! Here are the journal entries for each transaction:

July 15:

Accounts Receivable (or Cash) $10,000

Sales Revenue $10,000

Cost of Goods Sold $5,000

Inventory $5,000

In this entry, we record the sale of merchandise for $10,000, along with the associated cost of goods sold. The difference between the sales revenue and cost of goods sold gives us the gross profit.

August 1:

Cash $400 (4% of $10,000)

Sales Tax Payable $400

This entry records the collection and remittance of the sales tax. The sales tax is calculated as 4% of the $10,000 merchandise sale.

Now let's move on to the November transactions:

November 3:

Cash $300

Unearned Advance Ticket Revenue $300

This entry records the collection of cash for the sale of the six-game pack of advance tickets. Since the games haven't been played yet, the revenue is initially recorded as unearned.

November 20:

Unearned Advance Ticket Revenue $50 ($300 ÷ 6)

Advance Ticket Revenue $50

This entry records the recognition of revenue for the first game of the six-game pack. Since one-sixth of the games have been played, one-sixth of the revenue ($50) is recognized as earned revenue, while the remaining unearned revenue is still deferred.

It's important to note that these journal entries may vary based on the specific accounting policies and practices of the company. It's always recommended to consult with a professional accountant for accurate and tailored guidance.