In: Accounting
The following selected transactions apply to Topeca Supply for November and December Year 1. November was the first month of operations. Sales tax is collected at the time of sale but is not paid to the state sales tax agency until the following month.
Cash sales for November Year 1 were $65,000 plus sales tax of 7 percent.
Topeca Supply paid the November sales tax to the state agency on December 10, Year 1.
Cash sales for December Year 1 were $78,500 plus sales tax of 7 percent.
Required
a. Show the effect of the above transactions on a
statements model like the one shown as follows. In the Statement of
Cash Flows column, indicate whether the item is an operating
activity (OA), an investing activity (IA), or a financing activity
(FA). The letters NA indicate that an element is not affected by
the event. (Enter any decreases to account balances and
cash outflows with a minus sign.)
TOPECA SUPPLY | ||||||||||||||
Horizontal Statements Model | ||||||||||||||
Event | Assets | = | Liabilities | + | Stockholder's Equity | Income Statement | Statement of Cash Flows | |||||||
Cash | = | Sales Tax Payable | + | Common Stock | + | Retained Earnings | Revenue | – | Expense | = | Net Income | |||
1. | = | + | + | – | = | |||||||||
2. | = | + | + | – | = | |||||||||
3. | = | + | + | – | = |
b. What was the total amount of sales tax paid in Year 1?
Sales tax paid |
c. What was the total amount of sales tax collected in Year 1?
Sales tax collected |
d. What is the amount of the sales tax liability as of December 31, Year 1?
Sales tax liability |
e. On which financial statement will the sales tax liability appear?
The liability is shown on the. |
Sales tax is collected from customer and paid to Sales Tax Agency
When we receive from customer we create Sales Tax Payable and then pay it off later.