Question

Required information [The following information applies to the questions displayed below.] Grandpa Clocks, Inc. (GCI), is a retailer of wall, mantle, and grandfather clocks. Assume GCI sells a grandfather clock for $15,500 cash plus 4 percent sales tax. The clock had originally cost GCI $11,500. Show the accounting equation effects and prepare the journal entries related to this transaction. Assume GCI uses a perpetual inventory system. Indicate the effects of the amounts for the above transactions. (Enter any decreases to assets, liabilities, or stockholders equity with a minus sign.)

Answer 1

Ans:

Event	Assets		=	Liabilities		+	Stockholder's Equity
a	Cash	$16,120	=	Sales tax payable	$620	+	Sales revenue	$15,500
	Inventory	-$11,500	=			+	Cost of goods sold	-$11,500

Journal Entries - GCI
Event	Particulars	Debit	Credit
1	Cash Dr	$16,120
	Sales revenue		$15500
	Sales taxes payable		$620
	(To record sales)
2	Cost of goods sold Dr	$11,500.00
	Inventory		$11,500.00
	(To record cost of goods sold)

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