Question

Smith Corporation purchases merchandise on account from a supplier on June 30, 2019 for $4,000. On July 5, merchandise is sold for $5,000 plus state sales tax (5%) to Customer A on account. Assume that the perpetual inventory method is used. Required: 1. Prepare the journal entry to record the $4,000 purchase from the supplier. 2. Prepare the journal entry to record the sale to Customer A. 3. Prepare the journal entry to record payment of sales tax on these to the State X on July 31. A description is not necessary. 4. How much sales tax revenue or expense will Smith Corporation report on its income statement? Nm Descriptions and general ledger account numbers are not necessary for journal entries.

Answer 1

Answer is given below

Credit Date Journal 30-Jun Merchandise Inventory To Accounts Payable Debit $4,000 $4,000 | $5,250 05-Jul Accounts Receivable- Customer A To Sales To Sales Tax payable $5,000 $250 $4,000 05-Jul Cost of Goods Sold To Merchandise Inventory $40,000 $250 31-Jul Sales Tax payable To Bank $250 Sales tax collected will be $ 250 and remitted will $250 Net effect on Income Statement is zero Nothing is reported on Income Statement