Question

Lyon co. collected $1,200 in sales tax from customers during the month of march. in april, lyon sent the $1,200 sales tax to the state government. the entry to record payment to the state would include which of the following?

a. to sales tax expensecredit
b. to sales tax payabledebit
c. to sales tax expensedebit
d. to cashcredit
e. to sales tax payable

Answer 1

The correct accounting entry to record Lyon Co.'s sales tax payment to the state government includes a debit to Sales Tax Payable and a credit to Cash. This reflects a decrease in both the liability and cash account.B is the correct answer.

Step-by-step explanation:

Lyon Co. collected $1,200 in sales tax from customers in March and then sent this amount to the state government in April. The entry to record this payment would include a debit to Sales Tax Payable and a credit to Cash.

When a business collects sales tax, it records this collection as a liability because it owes the collected amount to the government. Thus, the correct option for recording the payment is: b. to Sales Tax Payable debit and d. to Cash credit.

This entry reduces the company's liability for the sales taxes payable and also reduces its cash account, reflecting the cash outflow to the state government.