Question

The following selected transactions relate to liabilities of Interstate Farm Implements for December of 2018. Interstate’s fiscal year ends on December 31. Required: Prepare the appropriate journal entries for these transactions. 1. On December 15, received $11,500 from Bradley Farms toward the purchase of a $149,500 tractor to be delivered on January 6, 2019. 2. During December, received $42,000 of refundable deposits relating to containers used to transport equipment parts. 3. During December, credit sales totaled $836,000. The state sales tax rate is 5% and the local sales tax rate is 2%. (This is a summary journal entry for the many individual sales transactions for the period.)

Answer 1

Answer:

Explanation:

The journal entries are shown below:

1. Cash A/c Dr $11,500

          To  Bradley Farm $11,500

(Being Advance received from the  Bradley Farm )

2. Bank A/c Dr $42,000

         To Deposits A/c $42,000

(Being refundable deposit received)

3. Accounts Receivables A/c Dr $894,520

              To Sales Revenue A/c $836,000

              To Sales Tax Payable A/c $58,520

(Being credit sales is made including sales tax)

The sale tax payable is computed below:

= Credit sales × state sales tax rate + Credit sales ×  local sales tax rate

= $836,000 × 5% + $836,000 × 2%

= $41,800 + $16,720