Question

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

2017

Jan. 9 Purchased computer equipment at a cost of \(12,000, signing a six-month, 9% note payable for that amount.

29 Recorded the week’s sales of \)63,000, three-fourths on credit and onefourth 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, 9% note, plus interest, at maturity.

Aug. 31 Purchased merchandise inventory for \(9,000, signing a six-month, 10% note payable. The company uses the perpetual inventory system.

Dec. 31 Accrued warranty expense, which is estimated at 4% 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. Round to the nearest dollar.

Short answer

Credit Sales Amount:$50,085

Cash Sales Amount: $16,695

Step-by-step solution

Journal entries

Working notes

$$\begin{gathered} \mathbf{Computation}\mathbf{}\mathbf{of}\mathbf{}\mathbf{sales}\mathbf{}\mathbf{tx}\mathbf{=}\mathbf{Sales}\mathbf{}\mathbf{Revenue}\mathbf{\times }\mathbf{Sales}\mathbf{}\mathbf{tax}\mathbf{}\mathbf{rate} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{63}\mathbf{,}\mathbf{000}\mathbf{\times }\frac{\mathbf{6}}{\mathbf{100}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{780} \end{gathered}$$

$$\begin{gathered} \mathbf{Credit}\mathbf{}\mathbf{Sales}\mathbf{}\mathbf{Amount}\mathbf{=}\left(\mathrm{sales}\mathrm{revenue}+\mathrm{Sales}\mathrm{Tax}\right)\mathbf{\times }\frac{\mathbf{3}}{\mathbf{4}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\left(\$63,000+\$3,780\right)\mathbf{\times }\frac{\mathbf{3}}{\mathbf{4}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{085} \end{gathered}$$

$$\begin{gathered} \mathbf{Cash}\mathbf{}\mathbf{Sales}\mathbf{}\mathbf{Amount}\mathbf{=}\left(\mathrm{Sales}\mathrm{revenue}+\mathrm{Sales}\mathrm{Tax}\right)\frac{\mathbf{1}}{\mathbf{4}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\left(\$63,000+\$3,780\right)\mathbf{\times }\frac{\mathbf{1}}{\mathbf{4}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{16}\mathbf{,}\mathbf{695} \end{gathered}$$

$$\begin{gathered} \mathrm{Interest}\mathrm{expense}\mathrm{of}9\%\mathrm{Notes}\mathrm{payable}=\mathrm{Notes}\mathrm{payable}\mathrm{Amount}\times \mathrm{Rate}\times \frac{\mathrm{No}.\mathrm{of}\mathrm{months}}{12} \\ =\$12,000\times \frac{9}{100}\times \frac{6}{12} \\ =\$540 \end{gathered}$$

localid="1654929686201" $$\begin{gathered} \mathrm{Interest}\mathrm{expense}\mathrm{of}10\%\mathrm{Notes}\mathrm{payable}=\mathrm{Notes}\mathrm{payable}\mathrm{Amount}\times \mathrm{Rate}\times \frac{\mathrm{No}.\mathrm{of}\mathrm{months}}{12} \\ =\$9,000\times \frac{10}{100}\times \frac{6}{12} \\ =\$450 \end{gathered}$$