Crystal Company does not segregate sales and sales taxes in it...

Question

Crystal Company does not segregate sales and sales taxes in its register. The register total for May 5 is $27,560, which includes a 6% sales tax. Prepare the journal entry to record the sales and related taxes.

Accepted Answer

Alright, let's try this one here. Crystal Company does not segregate sales and sales taxes in its register. The register total for May 5th is $27,560 which includes a 6% sales tax. Prepare the journal entry to record the sales and related taxes. Alright, so again this is a problem where they are not keeping track of revenue separately. We've got a total cash collected and we need to back into our sales revenue and into our sales tax payable. For our journal entry, we know that we're gonna have cash. We're gonna debit cash because we collected cash of 27,560, but we're going to have to split split that receipt of cash into the revenue that the company actually earned and the sales taxes payable that it owes to the government. Okay? So those are going to be our 2 credits. We're going to have revenue and we're going to have a liability for the sales tax payable. So let's use our formula. We had our sales revenue formula. We're going to back into the sales revenue from the total cash collected. So we have 27,560 in cash collected and we're going to divide that by 1 plus the sales tax percentage which is 6% here. So it's going to be 1.06, right? 1 +0.06 which is 1.06. All right? So let's see what what that comes out to. 27560 divided by 1.06, that comes out to 26,000. That means our sales revenue is 26,000 and the remainder of the cash received, well that's going to be sales taxes payable. Alright? So we know that our revenue now is 26,000, so that's that part of the journal entry and the remainder is going to be sales tax payable. So let's see what that amount is. Sales tax, well that's going to be the total cash received of 2,700,560 minus the 26,000 that was revenue. So that comes out to 1,560. 1,560 is our sales taxes. So there we go, that's going to be our liability right there, 1500 60, cool? And you can always double check this by going to our the revenue once you've gotten your revenue of 26,000. If you do 26,000 times 5% or excuse me, 6%, so 26,000 times 0.06, well, you're gonna get 1,500 60, right? So we had 26,000 in revenue and we multiply that by the sales tax percentage and we're gonna get that same number, 1560. Cool? Alright. So that's our journal entry right there. We're gonna debit cash for the total cash collected, credit revenue for the 26,000 and sales tax payable is a liability until we pay it off to the government, alright? Let's go ahead and move on to the next one.

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Crystal Company does not segregate sales and sales taxes in its register. The register total for May 5 is $27,560, which includes a 6% sales tax. Prepare the journal entry to record the sales and related taxes.