Accounting 101 - CH 7

Read the descriptions of the following transactions that are required during the accounting period for Mario's Electronics. A. Sold $2,200 in merchandise on credit. The transaction did not involve sales tax. B. Gave a $600 allowance to a credit customer for damaged merchandise. The original sale was subject to 8% sales tax. C. Received a check for $200 from a credit customer on account. D. Sold $200 in merchandise for cash. The transaction is subject to 8% sales tax. E. Accepted a return of $100 in merchandise from a credit customer. The original sale was subject to 8% sales tax. Record the general journal entries for the above transactions.

A. Accounts receivable 2,200(debit) Sales 2,200(credit) B. Sales returns and allowances 600(debit) Sales tax payable 48(debit) Accounts receivable 648(credit) C. Cash 200(debit) Accounts receivable 200(credit) D. Cash 216(debit) Sales 200(credit) Sales tax payable 16(credit) E.Sales returns and allowances 100(debit) Sales tax payable 8 (debit) Accounts receivable 108 (credit) Explanation: A. $2,200 B. $600 + $48 ($600 × 0.08) = $648 C. $200 D. $200 + $16 ($200 × 0.08) = $216 E. $100 + $8 ($100 × 0.08) = $108

Many retailers accept bank credit cards. Review the statements below and identify the statement that is incorrect regarding bank credit cards.

Accounts Receivable will be debited when recording bank credit card sales.

On Deck Sports Memorabilia store sells a Babe Ruth rookie card for $10,500 on account. If the sales tax on the sale is 7%, what is the amount debited to Accounts Receivable.

$11,235 Explanation: $10,500 List Price + $735 Sales Tax ($10,500 × 0.07) = $11,235 Accounts Receivable

Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the sales journal will include a credit to Sales for

$2,250.00

When a customer returns a product for which he has not yet paid, and for which sales tax was charged, which of the following journal entries is recorded?

debit sales returns and allowances, debit sales tax payable, credit accounts receivable

At the end of the month, after the equality of the debits and credits recorded in the sales journal is proved by comparing the column totals, the summary posting from the sales journal would include a

debit to Accounts Receivable, a credit to Sales Tax Payable, and a credit to Sales.

CJPenney issues its own credit cards to its customers who have established credit with them. Its customers used these cards to charge $300 worth of sales. There is no sales tax associated with the sales. CJPenney would record these sales by:

debiting Accounts Receivable $300 and crediting Sales $300.

After all postings have been made, the total of the schedule of accounts receivable should equal

the balance of the Accounts Receivable account in the general ledger.

Why is there not a description column within the sales journal?

Because the sales journal is used for a single purpose.

The Sales Returns and Allowances account is classified as

a contra revenue account.