Question

In: Accounting

A sale was made for $22,000 and the sales tax rate is 6%. What is included...

A sale was made for $22,000 and the sales tax rate is 6%. What is included in the journal entry to record this sale?

- credit to sales tax payable for 1320

-debit to cash for 22000

-debit to sales discount for 1320

-credit to sales revenue for 23200

If $12,000 is collected in advance on November 1st for 6 months' rent. What amount of rent revenue should be recognized by December 31?

- none, it will be recognized at the end of 6 month

- 2000

- 4000

-12000

Expert Solution

A) Sales revenue = $ 22,000

Sales tax rate = 6%

Sales tax amount = 22,000 x 6%

Sales tax amount = $ 1,320.

So journal entry will be a debit to Cash for $ 23,320 and credit to sales revenue for $ 22,000 and credit to sales tax payable for $ 1,320.

Hence, option A is the correct answer.

B) Total rent advance collected = $ 12,000.

So the amount of rent revenue recognized by December 31 will be the two months rental income from november 1 to December 31.

So two months rental revenue = (12,000/6) x 2

Two months rental revenue = $ 4,000.

Hence, option C is the correct answer.

SUMMARY:

A) The sales tax payable account is a liability account which is the sum need to paid to the government. Here, Sales tax amount is $ 1,320. So whole amount is collected from customers.

Cash ac Dr. $ 23,320

To sales revenue Cr. $ 22,000

To sales tax payable. Cr. $ 1,320

Hence, option A is the correct answer.

B) Rent advance of $ 12,000 is collected for six months and on December 31, two months rent income need to recognized.

Hence, option C is the correct answer.

ekkarill92 answered 2 years ago

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