Question

Required information Exercise 9.4A Recognizing sales tax payable LO 9-2 The following information applies to the questions displayed below.) The following selected transactions apply to Topeca Supply for November and December Year 1. November was the first month of operations, Sales tax is collected at the time of sale but is not paid to the state sales tax agency until the following month 1. Cash sales for November Year 1 were $165,000. plus sales tax of 7 percent. 2. Topeca Supply paid the November sales tax to the state agency on December 10, Year 1. 3. Cash sales for December Year 1 were $180,000, plus sales tax of 7 percent Exercise 9-4A Part a Required a. Record the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model shown below. (In the Cash Flow column, use the initials "OA" for operating activities, "FA" for financing activities, and "IA" for Investing activity. Enter any decreases to account balaşces with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding input needed.) Assets = - Liabilities Sales Tax Payable TOPECA SUPPLY Horizontal Statements Model Stockholder's Equity Income Statement Common Retained Stock Stock - Earnings Revenue - Expense Net Income Statement of Cash Flows I Cash

Answer 1

Event 1:

This is revenue generation through cash; therefore, it is the normal course of business and an operating activity.

Amount of sales tax payable = Sales × 7% = 165,000 × 7% = 11,550

Since there is no expense, the whole revenue becomes net income.

Event 2:

This is also an operating activity, since the payment of tax is normal course of business.

Since there is a payment, it reduces cash and would become negative.

Event 3:

It is same as event 1.

Amount of sales tax payable = Sales × 7% = 180,000 × 7% = 12,600

Assets + Income Statement Event Statement of Cash Flows Cash Stockholder's Equity Common Retained Stock Earnings 165,000 Revenue - Expense Net Income 1. = Liabilities Sales Tax Payable = 11,550 - 11,550 = 12,600 165,000 165,000 176,550 - 11,550 192,600 12. | OA ТОА | OA 3. | 180,000 180,000 180,000