Question

Ju The GOAT. Let's gra... Saved Help Se Required information Exercise 7-4 Recognizing sales tax payable LO 7-2 (The following information applies to the questions displayed below.) The following selected transactions apply to Topeca Supply for November and December 2018. 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 2018 were $65.000 plus sales tax of 7 percent. 2. Topeca Supply paid the November sales tax to the state agency on December 10, 2018. 3. Cash sales for December 2018 were $84,000 plus sales tax of 7 percent. -rcise 7-4 Part b < Prev 3 4 5 6 of 12 !!! Next >

Answer 1

a)

TOPECA SUPPLY
Horizontal Statements Model
	Assets	=	Liabilities	+	Stockholders' Equity			Income Statement
Events	Cash	=	Sales tax payable	+	Common stock	+	Retained Earnings	Revenues	-	Expenses	=	Net Income	Statement of cash flows
1	$69,550		$4,550				$65,000	$65,000				$65,000	$69,550	OA
2	($4,550)		($4,550)										($4,550)	OA
3	$89,880		$5,880				$84,000	$84,000				$84,000	$89,880	OA
Total	$154,880	=	$5,880	+	$0	+	$149,000	$149,000	-	$0	=	$149,000	$154,880

Working as follows:

Event 1 = Sales $65,000 $\times$ 7% = $4550

Total cash received = $65,000 + $4550 = $69550

Event 2 = $4550 sales tax paid

Event 3 = Sales $84,000 $\times$ 7% = $5,880

Total cash received = $84,000 + $5,880 = $89,880

________________________________________________________________

b)

Sales tax paid in 2018 = $4550

c)

Sales tax collected in 2018 = $4550+$5880 = $10430

d)

Sales tax liability as of December 2018 = $5880

e)

The liability is shown on the Balance Sheet under the head Current liabilities.