Excise and Sales Tax Calculations Allied Company has just bi

Excise and Sales Tax Calculations Allied Company has just billed a customer for $1,160, an amount that includes a ten percent excise tax and a six percent state sales tax. a. What amount of revenue is recorded? b. Prepare a journal entry to record the transaction on the books of Allied Company. Round all answers to the nearest dollar. a. Amount of recorded revenue$ b. General Journal Debit Credit Date Description 1,160 Dec.31 Accounts Receivable 116 X Excise Tax Payable 69.6 Sales Tax Payable 9744 X Sales To record sale on account subject to excise tax and sales tax.

Solution

Let the amount of sales be \"X\"

Amount billed = amount of sales+ sales payable+excise tax

1160 = X+ [X*.06]+[X.10]

   1160 = X +.06X +.10X

   1160 = 1.16 X

   X = 1160 /1.16

     = $ 1000

AMount of sales revenue = $ 1000

sales tax =1000*.06 = 60

excise =1000*.10 = 100