On January 1, 2017, the ledger of Ivanhoe Company contained these liability acco

Question

On January 1, 2017, the ledger of Ivanhoe Company contained these liability accounts. During January, the following selected transactions occurred. Jan. 1 Borrowed $18,000 in cash from Apex Bank on a 4-month, 5%, $18,000 note. 5 Sold merchandise for cash totaling $7,420, which includes 6% sales taxes. 12 Performed services for customers who had made advance payments of $10,200. (Credit Service Revenue.) 14 Paid state treasurer's department for sales taxes collected in December 2016, $6,800. 20 Sold 540 units of a new product on credit at $47 per unit, plus 6% sales tax. During January, the company's employees earned wages of $70,900. Withholdings related to these wages were $5,424 for Social Security (FICA), $5,064 for federal income tax, and $1,519 for state income tax. The company owed no money related to these earnings for federal or state unemployment tax. Assume that wages earned during January will be paid during February. No entry had been recorded for wages or payroll tax expense as of January 31.

Explanation / Answer

Journal Entry

5th January Cash A/c-Dr 7,420

To Sales 7,000 (7420*106*100)

To sales tax payable 420 (7420/106*6)

20th January Customer A/c - Dr 26,903 (47*1.06=49.82*540)

To Sales 25,380(47*540)

To sales Tax Payable 1,523 (47*6%=2.82*540)

Sales Tax Payable Date Particulars Amount Date Particulars Amount 14.1 To Cash(Sales Tax for December 6,800 1.1 By Bal b/d 6,800 5.1 By Cash 420 20.1 By Customer 1,523 31.1 To Balance c/d( Balancing Figure) 1,943

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