J.B. Good, Inc., a wholesaler, sold merchandise to a retailer which had properly

Question

J.B. Good, Inc., a wholesaler, sold merchandise to a retailer which had properly supplied it a resale certificate so that the retailer would not have to pay sales tax to J.B. Good, Inc. when it bought the merchandise. The sales tax rate is 6. The resale certificate is used when the buyer intends to resell the merchandise, and when it actually does resell the merchandise, it charges the applicable sales tax to its customer(s). J.B. Good, Inc. sold merchandise on open account for a total price of $10000). The merchandise had a cost (was carried in inventory at)$ 6.500. Make the entries that go on Good’s books for the sale and for the relief from inventory.

Explanation / Answer

Journal Entries in the Good's books for the sale and relief from inventory

Debit Amount

$

Credit Amount

$

S.No. Particulars

Debit Amount

$

Credit Amount

$

1 Accounts Receivable Dr 10,600 To Sales A/c 10,000 To Sales tax liability 600 (Being sales) 2 Sales tax liability A/c Dr 600 To Resale certificate 600 ((Being reslae certificate for exemption of sales tax) 3 Cost of good sold A/c Dr 6,500 To Inventory A/c 6,500 (Being inventory affected on sales)

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