Final answer:
The correct journal entry for Smith Company's service provided with a 9% state sales tax would include debiting Cash for $3,270, crediting Sales Revenue for $3,000, and crediting Sales Tax Payable for $270.
Step-by-step explanation:
When Smith Company provided services for $3,000 cash and the event is subject to a state sales tax of 9%, the correct journal entry to record the sales event would be to debit Cash and credit both Sales Revenue and Sales Tax Payable. Sales tax is calculated by multiplying the service amount by the tax rate. In this case, $3,000 multiplied by 9% equals $270.
The entry will look like this:
- Cash: $3,270 (Debit)
- Sales Revenue: $3,000 (Credit)
- Sales Tax Payable: $270 (Credit)
The Cash account is debited to record the receipt of cash including sales tax, the Sales Revenue account is credited to record the revenue earned from the services, and the Sales Tax Payable account is credited to record the liability the company has to remit to the state for sales tax collected.