Heines Clocks is a retailer of wall, mantle, and grandfather clocks and is located in the Empire Mall in Sioux Falls, South Dakota. Assume that a grandfather clock was sold for $16,500 cash plus 4 percent sales tax. The clock had originally cost Heines $12,500. Assume Heines uses a perpetual inventory system.
| 1. | Indicate the effects of the amounts for the above transactions. (Enter any decreases to account balances with a minus sign.) |
| Assets | = | Liabilities | + | Stockholders’ Equity | |||
2. Prepare the journal entries related for the above transactions. (If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field.)
a. Record the sales revenue of $16,500 plus 4 percent sales tax.
b. Record the cost of goods sold of $12,500.
| Sale price | 16500 |
| Cost | 12500 |
| Sales Tax | 4% |
The cash we receive will be in excess of the sales price
To solve:
Sale price =16500
Sales Tax 4% of 16500
=16500*4%
=660
Total Cash received
=16500+660
=$ 17,160
Journal Entry for the above transaction is as follow
| NO | Description | Debit $ | Credit $ |
| 1 | Cash | 17160 | |
| Sales Tax Payable | 660 | ||
| Sales Revenue | 16500 | ||
| 2 | Cost of goods sold | 12500 | |
| To Inventory | 12500 |
