Question

1. Carla Vista Co. enters sales and sales taxes separately on its cash register. On April 10, the register totals are sales $26,500 and sales taxes $1,325. 2. Wildhorse Co. does not segregate sales and sales taxes. Its register total for April 15 is $18,550, which includes a 6% sales tax.Prepare the entries to record the sales transactions and related taxes for Carla Vista Co.Prepare the entries to record the sales transactions and related taxes for Wildhorse Co.

Answer 1

Answer:

April 10: Carla Vista Co.

Debit Cash                                 $27,825.2

Credit Sales revenue                $26,500

Credit Sales tax payable             $1,325. 2

(To record sales transactions and related tax)

April 15: Wildhorse Co.

Debit Cash                                  $18,550

Credit Sales revenue                 $17,500

Credit Sales tax payable              $1,050

(To record sales transactions and related tax)

Explanation:

The sales tax is a certain percentage of the sales revenue. The tax is meant to be remitted to the government before a certain deadline based on the tax jurisdiction.

On Wildhorse Co., the sales tax payable of 6% was calculated by:

106% of Sales revenue = $18,550;

106%X = $18,550

X = Sales revenue = $18,550/106%

Sales revenue = $17,500

Sales tax payable = $18,550 - $17,500 = $1,050