Question

Which of the following represents the correct journal entry to record a taxable cash sale of $500 if the sales tax rate is 4%?

a. a debit to cash for $520, a credit to sales tax payable for $20, and a credit to sales revenue for $500.
b. a debit to cash for $520, a debit to sales tax expense for $20, and a credit to sales revenue for $500.
c. none of these answer choices are correct.
d. a debit to cash for $500, a credit to sales tax payable for $20, and a credit to sales revenue for $480.

Answer 1

The correct journal entry for a $500 taxable cash sale with a 4% sales tax includes debiting Cash for $520, crediting Sales Revenue for $500, and crediting Sales Tax Payable for $20.

option a is the correct

Step-by-step explanation:

The student is asking about recording a taxable cash sale in a journal entry when the sales tax rate is 4%. For a cash sale of $500, the appropriate entry to record the transaction would include calculating the sales tax by converting the percentage to a decimal and multiplying it by the sale amount. Since the sales tax rate is 4%, this would be $500 x 0.04, resulting in a sales tax of $20.

The correct journal entry is:

Therefore, the correct option is:

a. A debit to Cash for $520, a credit to Sales Tax Payable for $20, and a credit to Sales Revenue for $500.