Most of the food sold in retail stores in California is not subject to sales tax

Question

Most of the food sold in retail stores in California is not subject to sales taxes (e.g., candy), but some items are (e.g., soft drinks). Apparently, the candy lobbyists were more effective than soft drinks lobbyists when dealing with the state legislature. Most cash registers are designed to record taxable sales and nontaxable sales and automatically add the appropriate sales tax. The sales for the past week in the local Grocer's World store were $172,000 cash, of which $45,000 was taxable at a rate of 9%. Requirement 1. By using the A = L + SE equation, show the impact on the entity, both no v and when he sales taxes are paid at a later date. A so prepare corresponding ournal entries. Requirement 1. By using the A-L+SE equation, show the impact on the entity, both now and when the sales taxes are paid at a later date. (Enter decreases with a minus sign or parentheses and leave any unused cells blank.) ies+ Stockholders' Equity Retained Assets Sales tax Cash payable eamings Record sales Payment of taxes

Explanation / Answer

Solution:

Particulars Assets = Liabilities + Stockholder's Equity Cash = Sales Tax Payable + Retained Earnings Record Sales $176,050.00 $4,050.00 $172,000.00 Payment of Taxes -$4,050.00 -$4,050.00

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