Question

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,500 of cash sales that are subject to an 7% sales tax what is the journal entry to record the cash sales?

A) Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.
B) Debit Sales Taxes Payable $595; debit Cash $7.905: credit Sales $8,500.
C) Debit Cash $9,095 credit Sales $8,500; credit Sales Taxes Payable $595
D) Debit Accounts Receivable $9,095; credit Sales $8.500; credit Sales Taxes Payable $595.
E) Debit Cash $8,500, credit Sales $8.500; and record the taxes when paid.

Answer 1

The journal entry to record the cash sales would be;

A. Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.

Step-by-step explanation:

A. Entries of the cash sales

1. Account(cash sales)

Cash=$8,500

Debit cash=$8,500

Credit this account=$0

2. Account (credit sales)

Credit sales=8,500-(7% of 8,500)

Credit sales=8,500-595=$7,905

Credit sales account=$7,905

Debit this account=$0

3. Account (Credit sales taxes payable)

Credit sales taxes payable=7% of $8,500

Credit sales taxes payable=(7/100)×8,500=$595

Debit this account=$0

This can be written as;

Account Debit ($) Credit ($)

Cash $8,500

Credit sales account $7,905

Credit sales taxes payable $595

The journal entry to record the cash sales would be;

Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.