Question

The following transactions of Philadelphia Pharmacies occurred during 2017 and 2018:

2017

Jan. 9 Purchased computer equipment at a cost of \(7,000, signing a six-month, 8% note payable for that amount.

29 Recorded the week’s sales of \)68,000, three-fourths on credit and one-fourth for cash. Sales amounts are subject to a 6% state sales tax. Ignore cost of goods sold.

Feb. 5 Sent the last week’s sales tax to the state.

Jul. 9 Paid the six-month, 8% note, plus interest, at maturity.

Aug. 31 Purchased merchandise inventory for \(3,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.

Dec. 31 Accrued warranty expense, which is estimated at 2% of sales of \)609,000.

31 Accrued interest on all outstanding notes payable.

2018

Feb. 28 Paid the six-month 10% note, plus interest, at maturity.

Journalize the transactions in Plymouth’s general journal. Explanations are not required.

Short answer

Credit Sales Amount: $54,060

Cash Sales Amount: $18,020

Step-by-step solution

Journal entries

Date	Particular	Debit	Credit
2017
Jan 9	Computer Equipment	$ 7,000
	8% Notes Payable		$ 7,000
	Being equipment purchased at credit
29	Account Receivables	54,060
	Cash	18,020
	Sales Revenue		68,000
	6% Sales tax Payable		4,080
	Being sales made
Feb 5	6% Sales tax payable	4,080
	Cash		4,080
	Being sales tax deposited
Jul 9	8% Notes payable	7,000
	Interest Expense	280
	Cash		7,280
	Being notes payable paid at maturity
Aug 31	Merchandise Inventory	3,000
	10% Notes payable		3,000
	Being inventory purchased on credit
Dec 31	Warranty Expense (2% of $609,000)	12,180
	Estimated warranty payable		12,180
	Being warranty accrued
31	Interest Expense	100
	Interest Payable		100
	Being interest accrued
2018
Feb 28	10% Notes Payable	3,000
	Interest Payable	100
	Interest Expense (for 2 months)	50
	Cash		3,150
	Being notes payable paid at maturity

Working notes

$$\begin{gathered} Computingofsalestax=SalesRevenue\times Salestaxrate \\ =\$68,000\times \frac{6}{100} \\ =\$4,080 \end{gathered}$$

$$\begin{gathered} Creditofsalesamount=\left(SalesRevenue\times Salestax\right)\times \frac{3}{4} \\ =\left(\$68,000\times \$4,080\right)\times \frac{3}{4} \\ =\$54.060 \end{gathered}$$