June 26
All transactions that deal with a sale of cabinet components receive a 7% sales tax. Installation does not get a sales tax.
Record the sale of cabinet components with a list price of $4,200, plus sales tax, to customer Chad Hana. Included in the invoice are installation charges of 4 hours at $100 per hour.
Would I write this journal entry as:
DR Cash 4894.00
CR Cabinet Sales 4200.00
CR Installation Revenue 400.00
CR Sales Tax Payable 294.00
This is not a cash transaction, since it is not mentioned and the name of the customer is given. Therefore, this is an on-account transaction and accounts receivable should be debited.
Cabinet sale is $4,200 and sale tax should be calculated on this amount; (4200 × 7% =) $294.
Journal
Date |
Account titles & explanation |
P.ref |
Debit |
Credit |
26/06 |
Accounts receivable |
$4,894 |
||
Cabinet sale |
$4,200 |
|||
Installation revenue (4 × $100 =) |
$400 |
|||
Sale tax payable |
$294 |
|||
To record sale of cabinet with a charge of 7% sale tax, and installation. |
Working:
Amount of accounts receivable = 4200 + 400 + 294 = $4,894
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