JournaldrillCash sale with sales tax
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
Juniper Kitchen Supply sells cookware to a walk-in customer for $2,400 plus 7% state sales tax, all collected in cash. The cookware cost Juniper $1,450. Juniper uses a perpetual inventory system. Record the sale, the tax collected and the cost in one entry.
What this exercise teaches
The customer pays $2,400 + ($2,400 x 7%) = $2,568 in cash. Only the $2,400 is revenue; the $168 of tax is owed to the state, so Sales Tax Payable is credited. Sales tax collected from customers is never the seller's expense. Under a perpetual system the $1,450 cost moves from Inventory to Cost of Goods Sold at the time of sale.
A hint if you get stuck
The tax belongs to the state, not to the seller: it is a liability from the moment it is collected. Then move the goods out at cost.
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