Question

Sales Tax

Far and Wide Broadband provides Internet connection services to customers living in remote areas. During February 2020, it billed a customer a total of $295,000 before taxes. Weston also must pay the following taxes on these charges:

1. State of Kansas sales tax of 6%
2. Federal excise tax of 0.2%
3. State of Kansas excise tax of 0.4%

Required:

Assuming Far and Wide collects these taxes from the customer, what journal entry would Far and Wide make when the customer pays their bill? If an amount box does not require an entry, leave it blank.

	Accounts Receivable
	Sales Taxes Payable (State)
	Excise Taxes Payable (Federal)
	Excise Taxes Payable (State)
	Sales Revenue
	(Record sale)

Answer 1

Account titles and Explanation	Debit	Credit
Accounts Receivable                                    [$17,700 + $590 + $1,180 + $295,000]	$314,470
Sales Taxes Payable (State)                     [295,000 x 6%]		$17,700
Excise Taxes Payable (Federal)               [$295,000 x 0.20%]		$590
Excise Taxes Payable (State)                    [$295,000 x 0.40%]		$1,180
Sales Revenue		$295,000
(Record sale)