Question

On January 1, 2020, the ledger of Pharoah Company contains the following liability accounts.
Accounts Payable $53,900
Sales Taxes Payable 7,000
Unearned Service Revenue 15,800
During January, the following selected transactions occurred.
Jan. 5 Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.
12 Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.)
14 Paid state revenue department for sales taxes collected in December 2019 ($7,000).
20 Sold 810 units of a new product on credit at $50 per unit, plus 8% sales tax.
21 Borrowed $31,500 from Girard Bank on a 3-month, 8%, $31,500 note.
25 Sold merchandise for cash totaling $12,420, which includes 8% sales taxes
Journalize the January transactions

Answer 1

Answer:

Jan. 5

Cash $20,520 (debit)

Sales tax $1,642 (credit)

Sales Revenue $18,878 (credit)

Jan 12

Unearned Service Revenue $10,000 (debit)

Service Revenue $10,000 (credit)

Jan 14

Sales Tax Control $7,000 (debit)

Cash $7,000 (credit)

Jan 20

Trade Receivables $43,740 (debit)

Sales tax $3,240 (credit)

Sales revenue $40,500 (credit)

Jan 21

Cash $31,500 (debit)

Note Payable : Girard Bank $31,500 (credit)

Jan 25

Cash $12,420 (debit)

Sales tax $994 (credit)

Sales Revenue $11,426 (credit)

Explanation:

The Sales Tax is an amount collected by the Firm on behalf of the tax authorities and as such must not be included in the revenue amount.

At the end of the period the sales tax collected and the sales tax paid by the entity are reconciled and the amount of tax to be paid to tax authorities is established