/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 5E E13-5 (L01) (Adjusting Entry for... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 13: 5E (page 694)

E13-5 (L01) (Adjusting Entry for Sales Tax) During the month of June, Rowling Boutique recorded cash sales of \(233,200 and credit sales of \)153,700, both of which include the 6% sales tax that must be remitted to the state by July 15.

Instructions

Prepare the adjusting entries that should be recorded to fairly present the June 30 financial statements.

Short Answer

Expert verified

The sales revenue account is debited, and the sales tax payable account is credited with the same amount of $21,900 to record the transaction.

Step by step solution

01

Meaning of Adjusting Entries

Adjusting entries are those entries made to assign the right amount of revenue and expenses to each accounting period. An adjusting journal entry is an adjustment recorded at the end of an accounting period.

02

Adjusting entries for June 30 financial statements

Working notes:

Cash sales excluding sales tax = ($233,200 /106%) = $220,000

Credit sales excluding sales tax = ($153,700 / 106%) = $145,000

Sales tax = [($233,200 + $153,700) - $220,000 - $145,000]

= ($386,900 - $220,000 - $145,000)

= $21,900

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

(Contingencies) Presented below are three independent situations. Answer the question at the end of each situation:

1. During 2017, Salt-n-Pepa Inc. became involved in a tax dispute with the IRS. Salt-n-Pepa鈥檚 attorneys have indicated that they believe it is probable that Salt-n-Pepa will lose this dispute. They also believe that Salt-n-Pepa will have to pay the IRS between \(900,000 and \)1,400,000. After the 2017 financial statements were issued, the case was settled with the IRS for \(1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2017?

2. On October 1, 2017, Alan Jackson Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Jackson鈥檚 management along with its counsel have concluded that it is probable that Jackson will be responsible for damages, and a reasonable estimate of these damages is \)5,000,000. Jackson鈥檚 insurance policy of \(9,000,000 has a deductible clause of \)500,000. How should Alan Jackson Chemical report this information in its financial statements at December 31, 2017?

3. Melissa Etheridge Inc. had a manufacturing plant in Sudan, which was destroyed in the civil war. It is not certain who will compensate Etheridge for this destruction, but Etheridge has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Etheridge Inc.?

(Impairment of Debt Securities) Hagar Corporation has municipal bonds classified as a held-to-maturity at December 31, 2017. These bonds have a par value of \(800,000, an amortized cost of \)800,000, and a fair value of \(720,000. The

The company believes that impairment accounting is now appropriate for these bonds.

Instructions

(a) Prepare the journal entry to recognize the impairment.

(b) What is the new cost basis of the municipal bonds? Given that the maturity value of the bonds is \)800,000, should Hagar

Do corporations amortize the difference between the carrying amount and the maturity value over the life of the bonds?

(c) On December 31, 2018, the fair value of the municipal bonds is $760,000. Prepare the entry (if any) to record this information

(Available-for-Sale and Held-to-Maturity Debt Securities Entries) The following information relates to the debt

securities investments of Wildcat Company.

1. On February 1, the company purchased 10% bonds of Gibbons Co. having a par value of \(300,000 at 100 plus accrued interest.

Interest is payable on April 1 and October 1.

2. On April 1, semiannual interest is received

3. On July 1, 9% of bonds of Sampson, Inc. were purchased. These bonds with a par value of \)200,000 were purchased at 100

plus accrued interest. Interest dates are June 1 and December 1.

4. On September 1, bonds with a par value of $60,000, purchased on February 1, are sold at 99 plus accrued interest.

5. On October 1, semiannual interest is received.

6. On December 1, semiannual interest is received.

7. On December 31, the fair value of the bonds purchased February 1 and July 1 were 95 and 93, respectively.

Instructions

(a) Prepare any journal entries you consider necessary, including year-end entries (December 31), assuming these are

available-for-sale securities.

(b) If Wildcat classified these as held-to-maturity investments, explain how the journal entries would differ from those in part (a).

Explain the accounting for an assurance-type warranty.

How are current liabilities related by definition to current assets? How are current liabilities related to a company鈥檚 operating cycle?
See all solutions

Recommended explanations on Business Studies Textbooks

Strategy

Read Explanation

Financial Performance

Read Explanation

Operational Management

Read Explanation

Strategic Analysis

Read Explanation

Organizational Communication

Read Explanation

Change Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.