Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 10-3

Purpose: (L.O. 3) This exercise will provide an example of the proper accounting for an obligation to an agency of the state government—unremitted sales taxes.

During the month of June, Chelsea's Boutique had cash sales of $234,000 and credit sales of $137,000, both of which include the 6% sales tax that must be remitted to the state by July 15. Sales taxes on June sales were lumped with the sales price and recorded as a credit to the Sales Revenue account.

During the month of July, Chelsea's Boutique set up a new cash register that rings up sales and the 6% sales tax separately. The register totals for July were cash sales of $220,000 and credit sales of $110,000. The related sales tax is not due to be paid until August 15.

Instructions

• (a) Prepare the journal entry to record June's sales at June 30 (assuming the total sales for June are recorded at June 30).
• (b) Prepare the adjusting entry that should be recorded to fairly present the financial statements at June 30.
• (c) Prepare the journal entry to record the remittance of the sales taxes on July 12.
• (d) Prepare the journal entry to record July's sales at July 31.