Question

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

1. On December 5, the store received $490 from the Selig Players as a deposit to be returned after certain furniture to be used in stage production was returned on January 15.
2. During December, cash sales totaled $821,100, which includes the 5% sales tax that must be remitted to the state by the fifteenth day of the following month.
3. On December 10, the store purchased for cash three delivery trucks for $110,300. The trucks were purchased in a state that applies a 5% sales tax.
4. The store determined it will cost $96,300 to restore the area (considered a land improvement) surrounding one of its store parking lots, when the store is closed in 2 years. Blossom estimates the fair value of the obligation at December 31 is $77,400.

Answer 1

1. Dec. 5 Cash$490

Cr Due to customer$490

2. Dec. 1-31

Dr Cash821,100

Cr Sales Revenue782,000

Cr Sales Tax Payable 39,100

Dec. 10

Dr Trucks 115,815

Cr Cash115,815

Dec.31

Dr Land improvements 77,400

Cr Asset Retirement Obligation 77,400

Step-by-step explanation:

Preparation of Journal entries

1. Dec. 5 Cash 490

Cr Due to customer 490

2. Dec. 1-31

Dr Cash821,100

Cr Sales Revenue782,000

Cr Sales Tax Payable 39,100

(821,100-782,000)

Dec. 10

Dr Trucks 115,815

Cr Cash115,815

Dec.31

Dr Land improvements 77,400

Cr Asset Retirement Obligation 77,400

Workings:

Dec. 1-31

Sales Revenue= ($821,100 ÷ 1.05)

Sales Revenue=$782,000

Sales Taxes Payable =($782,000 ×0.05)

Sales Taxes Payable=$39,100

Dec. 10Trucks= ($110,300 × 1.05)

Trucks =$115,815