Listed below are a few transactions and events of Piper Company. Piper Company records a year-end entry for $10,000 of previously unrecorded cash sales (costing $5,000) and its sales taxes at a rate of 4%. The company earned $50,000 of $125,000 previously received in advance and originally recorded as unearned services revenue. Prepare any necessary adjusting entries at December 31, 2017, for Piper Company's year-end financial statements for each of the above separate transactions and events. (Piper has the policy of recording cash received in advance in balance sheet accounts.)

Answer and Explanation:

The Journal entry is shown below:-

1. Cash Account Dr, $10,400

To Sales account $10,000

To Sales Tax Payable account $400 ($10,000 * 4%)

(Being cash received is recorded)

Here we debited the cash as it increased the assets and we credited the sales and sales tax payable as it increased the sales and liabilities.

2. Cost of Goods Sold Dr, $5,000

To Inventory $5,000

(Being Cost of Goods sold is recorded)

Here we debited the cost of goods sold as it increase the expenses and we credited the inventory as it decrease the assets

3. Unearned Services Revenue Dr, $50,000

To Earned Services Revenue $50,000

(Being unearned service revenue is recorded)

Here we debited the unearned service revenue as it decreased the liabilities and we credited the earned service revenue as it increased the sales