Question

Required information Exercise 9-4A (Algo) 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 $65,500 plus sales tax of 8 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 $81,000 plus sales tax of 8 percent.

Answer 1

1.

TOPECA SUPPLY
Horizontal Statement Model
Event	Assets	=	Liabilities	+	Stock Holder's Equity	Income Statement	Statement of Cash Flows
Cash	=	Sales Tax Payable	+	Common Stock	+	Retained Earnings	Revenue	-	Expense	=	Net Income
1	70200		5200					65000		0		65000	70200	OA
2	-5200		-5200					0		0		0	-5200	OA
3	87480		6480					81000		0		81000	87480	OA
	152480		6480					146000		0		146000	152480

2. Total Sales Tax Paid = $5200 (on Dec10th)

3. Sales Tax Collected during the year = 5200+6480 = 11680

4. Sales Tax Liability on Dec31 = 6480

5. Sales Tax Liability is shown on Balance Sheet

Note :

	Sales Value	65000	81000
Collected	Sales Tax@8%	5200	6480
Paid		5200	-
Payable		6480

(Hope you will understand this, Please give your valuable feedback)