Question

Cypress Corp. had sales on account of $19,500 which were subject to state sales tax of 12%. The entry to record the sales would be to:

A. debit Accounts Receivable $21,840; credit Sales Revenue $21,840.

B. debit Accounts Receivable $21,840; credit Sales Revenue $19,500; credit Sales Tax Payable $2,340.

C. debit Accounts Receivable $19,500; credit Sales Revenue $19,500.

D. debit Accounts Receivable $19,500; debit Sales Tax Payable $2,340; credit Sales Revenue $21,840.

Answer 1

The correct journal entry for Cypress Corp.'s sales with 12% sales tax is to debit Accounts Receivable for $21,840 and credit Sales Revenue for $19,500 and Sales Tax Payable for $2,340, which is answer option B.

Step-by-step explanation:

The correct entry to record Cypress Corp.'s sales on account with a state sales tax of 12% is to debit Accounts Receivable for the total amount receivable from the customer and credit Sales Revenue for the value of the goods or services provided and Sales Tax Payable for the amount of sales tax owed to the government. Therefore, the entry involves debiting Accounts Receivable for the total of $19,500 plus the 12% sales tax, which is $2,340, equaling $21,840. Concurrently, you credit Sales Revenue for the actual sales amount of $19,500 and credit Sales Tax Payable for the $2,340 tax collected.

To calculate the sales tax, you multiply the sales amount by the sales tax percentage as follows: $19,500 × 12% (or 0.12), resulting in $2,340. The journal entry is thus: Debit Accounts Receivable $21,840; Credit Sales Revenue $19,500; Credit Sales Tax Payable $2,340. This corresponds to option B given in the question.