Question

General Lighting During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. The price of each battery includes a $1.95 federal excise tax. Any taxes collected must be paid to the appropriate governmental units at the end of the quarter. Which of the following is the proper journal entry to record for the sale of the batteries?

a. Accounts Receivable 636,000, Sales Tax Expense 36,000, Excise Tax Expense 7,800, Sales Revenue 643,800

b. Accounts Receivable 636,000, Sales Revenue 592,200, Sales Tax Payable 36,000, Federal Excise Tax Payable 7,800

c. Accounts Receivable 636,000, Excise Tax Expense 7,800, Sales Revenue 607,800, Sales Tax Payable 36,000

d. Accounts Receivable 643,800, Sales Revenue 600,000, Sales Tax Payable 36,000, Federal Excise Tax Payable 7,800

Answer 1

Solution:

Accounts receivables to be debited for = (4000*$150) * 106% = $636,000

Sales revenue to be credited for = (4000*$148.05) = $592,200

Sales tax payable to be credited for = $36,000

Federal excise tax payable to be credited for = 4000*$1.95 = $7,800

Hence option b is correct.