Question

what is the journal entry to record the merchandise returned when the original amount sold on account was $503.50 ($475.00 sales plus $28.50 sales tax) and the customer returned merchandise on November 6, 2007 for which they were charged $62.01 ( including sales tax).

Answer 1

WORKING NOTES:
	CALCULATION OF SALES TAX RATE CHARGED
	Sales Tax Rate = Sales Tax Amount / Sales Value
	Sales Tax Rate =      $ 28.50   / $ 475
	Sales Tax Rate =      0.06 or 6%
	CALCULATION OF SALES TAX VALUE IN RETURNED MATERIAL
	Sales Tax   Amount    = Sales Value *100 / 106
	Sales Tax   Amount    = $ 62.01   X 6 / 106
	Sales Tax   Amount    =   $ 3.51
	Sales Value = $ 62.01 - $ 3.51
	Sales Value =    $ 58.50
SOLUTION :
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	-------	Sales Return and Allowance	$58.50
		Sales Tax Payable	$3.51
		Account Receivable		$62.01