Question

Co. has Sales Revenue of $89,781 for the period. If Co. is responsible for 4% sales...

Co. has Sales Revenue of $89,781 for the period. If Co. is responsible for 4% sales tax and makes one sales tax adjusting entry at the end of each period what would the balance of the Sales Tax Payable account be after the adjusting journal entry was made? (Assume that the Sales Tax Payable account had a beginning credit balance of $2,121.)
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Answer #1

Calculation of balance in Sales tax payable account

Beginning balance

$ 2,121.00

Added during the period (89781 x 4%)

$ 3,591.24

Ending balance after adjusting entry

$ 5,712.24

It is assumed that Sales revenue amount is exclusive of Sales tax.

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Alternate answer could be as follows

Calculation of balance in Sales tax payable account

Beginning balance

$ 2,121.00

Added during the period (89781/104 x 4

$ 3,453.12

Ending balance after adjusting entry

$ 5,574.12
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