Question

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $13,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

Answer 1

To record Cantrell Company's cash sales with an 8% sales tax, the journal entry would debit Cash for the total amount including tax, credit Sales for the sales amount, and credit Sales Tax Payable for the tax amount.

Step-by-step explanation:

The student has asked about recording a journal entry for cash sales including sales tax. Cantrell Company has made $13,000 in cash sales with an 8% sales tax, which requires a specific accounting transaction. The journal entry to record the cash sales and the sales tax liability would be:

Debit Cash $14,040 (which is $13,000 plus 8% sales tax)

Credit Sales $13,000

Credit Sales Tax Payable $1,040 (which is the 8% of $13,000)

It's important to differentiate between the actual sales revenue and the sales tax that is collected on behalf of the state, which is a liability until it is remitted to the state.

Answer 2

Answer: $1040

Step-by-step explanation:

You would debit the accounts receivable for the entire amount of the sale.

then you would credit the sales account for the sales amount (minus the sales tax amount)

the add a credit to the sales tax liability account for the amount of sales taxes