Question

B & B Farms has a retail store where it sells products produced on the farm. In October, it had sales of $8,000. The sales tax rate in effect is 6%. Prepare the entry to record sales taxes.

Answer 1

To record the sales taxes, you would debit the Sales Tax account for $480 and credit the Revenue account for $480.

Step-by-step explanation:

To calculate the sales tax, multiply the sales amount by the tax rate. In this case, the sales amount is $8,000 and the tax rate is 6%, so the sales tax would be:

$8,000 x 0.06 = $480

To record the sales taxes, you would debit the Sales Tax account for $480 and credit the Revenue account for $480. This entry reflects the increase in liabilities (sales tax owed) and the increase in revenue.