Barnes Company has just billed a customer for $1,010, an amount that includes a

ID: 2572512 • Letter: B

Question

Barnes Company has just billed a customer for $1,010, an amount that includes a eleven percent excise tax and a four percent state sales tax.

a. What amount of revenue is recorded?
b. Prepare a general journal entry to record the transaction on the books of Barnes Company.

Round all answers to the nearest dollar.

a. Amount of recorded revenue $Answer

General Journal Date Description Debit Credit Dec.31 AnswerAccounts ReceivableExcise Tax PayableSales Tax PayableSales $Answer $Answer Excise Tax Payable Answer Answer Sales Tax Payable Answer Answer AnswerAccounts ReceivableExcise Tax PayableSales Tax PayableSales Answer Answer To record sale on account subject to excise tax and sales tax.

Explanation / Answer

Solution:

a) Revenue Recorded = $875 (refer working below)

Date

Description

Debit

Credit

Dec.31

Accounts Receivable

$1,010

Excise Tax Payable

$96

Sales Tax Payable

$39

Sales Revenue

$875

Refer Working

Amount billed to Customer = Sales Revenue + Excise Tax + Sales Tax

Excise Tax is levied on the removal of goods from factory.

Thereafter Sales Tax is levied.

Hence,

Amount billed to Customer = Sales Revenue + (Sales Revenue x Excise 11%) + (Sales Revenue including Excise Tax x Sales Tax 4%)

Let Sales Revenue = S

Excise Tax = S x 0.11 = 0.11S

Sales Tax = (Sales Revenue + Excise Tax) x 4% = (S+0.11S) x 0.04 = 1.11S x 0.04 = 0.0444S

Amount billed to customer = Sales Revenue (S) + 0.11S + 0.0444S

$1,010 = 1.1544 S

Sales Revenue = $1,010 / 1.1544 = $875

Hence,

Excise Tax Payable = Sales Revenue 875 * 11% = $96

Sales Tax Payable = (875+96)*4% = $39

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