Question

How should Osgood Company record the sale of merchandise on account, $3,500, with terms n/30, and a sales tax percentage of 7% on March 25?

A) Debit Accounts Receivable, credit Sales.
B) Debit Sales, credit Accounts Payable.
C) Debit Cash, credit Sales.
D) Debit Accounts Receivable, credit Sales Tax Payable.

Answer 1

To record the sale of merchandise on account, Osgood Company should debit Accounts Receivable for $3,500 and credit Sales. The sales tax amount should be recorded separately by debiting Sales Tax Payable and crediting Sales.

Step-by-step explanation:

To record the sale of merchandise on account, Osgood Company should debit Accounts Receivable for the amount of $3,500 and credit Sales for the same amount. The sales tax amount of 7% should be recorded separately. Osgood Company should debit Sales Tax Payable for the amount of $245 (which is 7% of $3,500) and credit Sales for the same amount. The terms of n/30 indicate that the customer has 30 days to pay the amount in full.