Question

Required information [The following information applies to the questions displayed below] Grandpa Clocks, Inc. (GCI), is a retailer of wall, mantle, and grandfather clocks. Assume GCI sells a grandfather clock for $10,000 cash plus 4 percent sales tax. The clock had originally cost GCI $6,000. Show the accounting equation effects and prepare the journal entries related to this transaction. Assume GCI uses a perpetual inventory system 1. Indicate the effects of the amounts for the above transactions. (Enter any decreases to assets, liabilities, or stockholders equity with a minus sign.) Stockholders' Equity Assets Liabilities

Answer 1

1.) Assets Liabilities + Stockholders' Equity Cash $10,400 = Sales Tax Payable $400 + Retained Earnings $10,000 Inventory $ -6,000 = $- + Retained Earnings $ -6,000

Credit Debit $ 10,400 Transaction General Journal Cash Sales Revenue Sales Tax Payable (Being sales recorded) $10,000 $ 400 2 $ 6,000 Cost of Goods Sold Inventory (Being cost of goods sold recorded) $ 6,000