The following selected transactions relate to liabilities of Interstate Farm Imp

Question

The following selected transactions relate to liabilities of Interstate Farm Implements for December of 2018. Interstate’s fiscal year ends on December 31. Required: Prepare the appropriate journal entries for these transactions. 1. On December 15, received $7,500 from Bradley Farms toward the purchase of a $98,000 tractor to be delivered on January 6, 2019. 2. During December, received $25,500 of refundable deposits relating to containers used to transport equipment parts. 3. During December, credit sales totaled $800,000. The state sales tax rate is 5% and the local sales tax rate is 2%. (This is a summary journal entry for the many individual sales transactions for the period.)

Explanation / Answer

Transactions

General Journal

Debit

Credit

1.

Cash

7500

Liability — customer advance

7500

2.

Cash

25500

Liability — refundable deposits

25500

3.

Accounts receivable

856000

Sales revenue

800000

Sales taxes payable ([5% + 2%] x $800000)

56000

Transactions

General Journal

Debit

Credit

1.

Cash

7500

Liability — customer advance

7500

2.

Cash

25500

Liability — refundable deposits

25500

3.

Accounts receivable

856000

Sales revenue

800000

Sales taxes payable ([5% + 2%] x $800000)

56000

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