Vail Book Mart sells books and other supplies to students in a state where the sales tax rate is 8 percent. Vail Book Mart engaged in the following transactions for Year 1. Sales tax of 8 percent is collected on all sales.

1. Book sales, not including sales tax, for Year 1 amounted to $250,000 cash.

2. Cash sales of miscellaneous items in Year 1 were $85,000, not including tax.

3. Cost of goods sold was $190,000 for the year.

4. Paid $117,000 in operating expenses for the year.

5. Paid the sales tax collected to the state agency.

Required:

a. What is the total amount of sales tax Vail Book Mart collected and paid for the year? Sales tax collected

b. Prepare the journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Question

Business

Sonny Morris

13 June, 21:46

Vail Book Mart sells books and other supplies to students in a state where the sales tax rate is 8 percent. Vail Book Mart engaged in the following transactions for Year 1. Sales tax of 8 percent is collected on all sales.

1. Book sales, not including sales tax, for Year 1 amounted to $250,000 cash.

2. Cash sales of miscellaneous items in Year 1 were $85,000, not including tax.

3. Cost of goods sold was $190,000 for the year.

4. Paid $117,000 in operating expenses for the year.

5. Paid the sales tax collected to the state agency.

Required:

a. What is the total amount of sales tax Vail Book Mart collected and paid for the year? Sales tax collected

b. Prepare the journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

+3

Answers (2)

Know the Answer?

Pierce Maxwell · Answer 1

A) Amount of Sales Tax (at 8%) collected and paid

= (250000*0.08) + (85000*0.08)

= 20000 + 6800

= 26800

B) Journal Entries

1. Dr Cash 270000

Cr Sales revenue 250000

Cr Sales tax payable 20000

2. Dr Cash 91800

Cr Sales revenue 85000

Cr Sales tax payable 6800

3. Dr Sales Tax Payable 26800

Cr Cash 26800

4. Dr Operating Expenses 117000

Cr Cash 117000

Kiana Hayes · Answer 2

a. What is the total amount of sales tax Vail Book Mart collected and paid for the year?

total sales x 8% = ($250,000 + $85,000) x 8% = $335,000 x 8% = $26,800

b. Prepare the journal entries for the above transactions.

1)

Dr Cash 270,000

Cr Sales revenue 250,000

Cr Sales tax payable 20,000

2)

Dr Cash 91,800

Cr Sales revenue 85,000

Cr Sales tax payable 6,800

3) If the company uses a periodic inventory system:

Dr Cost of goods sold 190,000

Cr Merchandise (books and others) inventory 190,000

4) this journal entry is necessary only if all operating expenses were paid at the same time, if not, several journal entries for specific expenses should have been made:

Dr Operating expenses 117,000

Cr Cash 117,000

5)

Dr Sales tax payable 26,800

Cr Cash 26,800