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

Ans JOURNAL ENTRIES

  

DATE	PARTICULARS	DEBIT	CREDIT
DEC 15	BANK A/C DR	11500
	TO ADVANCE RECEIVED ON TRACTOR		1500
	(BEING ADVANCE RECEIVED FOR THE TRACTOR)
DEC 31	BANK A/C DR	42000
	TO DEPOSITS A/C		42000

(BEING REFUNDABLE DEPOSITS RECEIVED)

DATE	PARTICULARS	DEBIT	CREDIT
DEC 31	CUSTOMERS/ DEBTORS A/C DR	894520
	TO SALES A/C		836000
	TO STATE SALES TAX		41800
	TO LOCAL SALES TAX		16720

(BEING SALES MADE TO CUSTOMER / DEBTOR )

NOTES : 1. SINCE FOR ENTRY 2 AND ENTRY 3 DATE OF ENTRY IS NOT MENTIONED HENCE , FOR THOSE TRANSACTIONS WE HAVE MADE ENTRY IN 31ST DECEMBER .

2. FOR ENTRY 3 WHERE CREDIT SALES IS MADE WE HAVE MADE TAX CALCULATIONS ON RS 836000 . CUSTOMER ACCOUNT IS DEBITED WITH TAX 894520 WHICH INCLUDES STATE SALES TAX RS 41800(836000*0.05) AND LOCAL SALES TAX RS 16720 (836000*0.02)