Question

Indigo Company had cash sales of $78,120 (including taxes) for the month of June. Sales are subject to 8.5% sales tax. how to record the sale ?

Answer 1

Explanation:

Sales revenue x (100%+sales tax rate) = total sales including tax

sales revenue x 1.085 (100% + 8.5%) = 78120

sales revenue = 78120/1.085

sales revenue = 72000

total sales including tax - sales revenue = sales tax

78120 = 72000 = 6120

Journal entry:

cash. 78120

Sales revenue. 72000

Sales tax payable. 6120