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26 January, 06:40

The following selected transactions relate to liabilities of Chicago Glass Corporation for 2016. Chicago's fiscal year ends on December 31.

1.

On January 15, Chicago received $7,600 from Henry Construction toward the purchase of $72,000 of plate glass to be delivered on February 6.

2.

On February 3, Chicago received $7,300 of refundable deposits relating to containers used to transport glass components.

3.

On February 6, Chicago delivered the plate glass to Henry Construction and received the balance of the purchase price.

4.

First quarter credit sales totaled $760,000. The state sales tax rate is 4% and the local sales tax rate is 2%.

Required:

Prepare journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Answers (1)
  1. 26 January, 07:08
    0
    cash 7,600

    nearned revenue 7,600

    cash 7,300

    refundable deposist 7,300

    cash 57,100

    refundable deposist 7,300

    unearned revenue 7,600

    service revenue 76,000

    sales tax expense 45,600

    state tax payable 30,400

    local tax payable 15,200

    Explanation:

    (1) as the services are not yet perform, this is a liability for Chicago Glass Corportation. It assumes to obligation of do this services.

    (2) This will be refund once the job are complete and the containers returned in good form

    (3) 72,000 - 7,600 = 64,400 - 7,300 = 57,100

    Chicago deduct rom the invoince the previous payment and the refundable deposits once the transaction is finished.

    (4)

    760,000 x 4% = 30,400

    760,000 x 2% = 15,200

    30,400 + 15,200 = 45,600
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