Question

Merchandise is sold for cash. The selling price of the merchandise is $2,100, and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include:

a) Credit to Sales for $2,247
b) Credit to Cash for $2,247
c) Credit to Cash for $2,100
d) Credit to Sales Tax Payable for $147

Answer 1

The merchandise sale of $2,100 with a 7% sales tax results in a total of $2,247 collected in cash. The journal entry would include a credit to Sales for $2,100 and a credit to Sales Tax Payable for $147.

Step-by-step explanation:

When recording the sale of merchandise for cash that includes a state sales tax, the correct journal entry needs to account for both the revenue from the sale and the liability incurred due to the sales tax.

In this case, the merchandise is sold for $2,100 with a 7% sales tax. To calculate the amount of sales tax, you multiply the selling price by the sales tax rate:

$2,100 × 0.07 = $147

The total amount of cash received is the sum of the selling price and the sales tax, which is:

$2,100 + $147 = $2,247

The correct journal entry would include:

• A debit to Cash for $2,247
• A credit to Sales for $2,100
• A credit to Sales Tax Payable for $147