In performing accounting services for small businesses, you encounter the following situations pertaining to cash sales. 1. Kingbird, Inc. enters sales and sales taxes separately in its cash register. On April 10, the register totals are sales $40,000 and sales taxes $2,000. 2. Carla Vista Co. does not segregate sales and sales taxes. Its register total for April 15 is $22,260, which includes a 6% sales tax. Prepare the entry to record the sales transactions and related taxes for each client.

Question

Business

Aleah Pierce

8 February, 07:00

In performing accounting services for small businesses, you encounter the following situations pertaining to cash sales. 1. Kingbird, Inc. enters sales and sales taxes separately in its cash register. On April 10, the register totals are sales $40,000 and sales taxes $2,000. 2. Carla Vista Co. does not segregate sales and sales taxes. Its register total for April 15 is $22,260, which includes a 6% sales tax. Prepare the entry to record the sales transactions and related taxes for each client.

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Taniyah Williams · Answer 1

Dr cash $42,000

Cr sales revenue $40,000

Cr sales tax payable $2,000

Dr cash $22,260

Cr sales revenue $21,000

cr sales tax payable $1260

Explanation:

In the first scenario the total cash received would the sales amount plus the sales tax on it, in other words $42,000 ($40,000+$2,000). The $42,00 would be debited to cash while the sales account and sales tax payable is credited with $40,000 and $2,000 respectively.

In the second, the amount of sales tax payable is 6/106*$22,260=$1260

This implies that total sales is itself 100%,6% sales tax added.

sales amount=$22,260-$1260=$21,000