Question

During the month of June, Sweet Boutique had cash sales of $219,420 and credit sales of $153,382, both of which include the 6% sales tax that must be remitted to the state by July 15.

Prepare the adjusting entry that should be recorded to fairly present the June 30 financial statements. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

• All working forms part of the answer
• First, we need to calculate the amount of Sales Tax that is to be paid next month:

A	Cash Sale	$          219,420.00
B	Credit Sale	$          153,382.00
C = A + B	Total Sales Including sales tax	$          372,802.00
D	Sales Tax Rate	6%
E = 100% + D	Total Sales Including sales tax %	106%
F = C/E	Sales Value (excluding Sales tax)	$          351,700.00
G = F x D or F x 6%	Sales Tax payable	$            21,102.00

• Adjusting entry will be:

Daye	Accounts title	Debit	Credit
30-Jun	Sales revenue	$            21,102.00
	Sales Tax payable		$         21,102.00
	(Sales tax to be paid next month)