Question

In performing accounting services for small businesses, you encounter the following situations pertaining to cash sales. 1. Ivanhoe Company enters sales and sales taxes separately on its cash register. On April 10, the register totals are sales $29,500 and sales taxes $1,475. 2. Pharoah Company does not segregate sales and sales taxes. Its register total for April 15 is $18,530, which includes a 9% sales tax.

Answer 1

Requirement: Prepare the entry to record the sales transactions and related taxes.

1. Date Account Titles and Explanation Debit Credit

Apr. 10 Cash $30,975

Sales Revenue $29,500

Sales Tax Payable $1,475

(To record Cash sales along with sales tax)

2. Date Account Titles and Explanation Debit Credit

Apr. 15 Cash $18,530

Sales Revenue $17,000

Sales Tax Payable $1,530

(To record Cash sales along with sales tax)

Workings

- Total Sales along with sales tax = $18,530, Sales Tax Rate = 9%. Sales Tax Amount = 18530*(0.09/1.09) = $1,530

- Sales Without Sales Tax = $18,530 - $1,530 = $17,000