Question

During December, Far West Services makes a $2,400 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. (Note: the sales tax amount is in addition to the credit sale amount.) Record sales and sales tax payable.

Answer 1

To record the sales and sales tax payable for the $2,400 credit sale, you would debit accounts receivable for $2,400 and credit sales for $2,400. Then, you would calculate the sales tax payable by multiplying the total credit sale amount by the combined state and local sales tax rate. Finally, you would debit sales tax payable for $204 and credit sales tax revenue for $204 to reflect the amount owed for sales tax.

Step-by-step explanation:

To record the sales and sales tax payable for the $2,400 credit sale, you would debit accounts receivable for $2,400 and credit sales for $2,400. Then, you would calculate the sales tax payable by multiplying the total credit sale amount by the combined state and local sales tax rate:

Sales tax payable = Credit sale amount * (State tax rate + Local tax rate)

Plugging in the values:

Sales tax payable = $2,400 * (0.06 + 0.025) = $2,400 * 0.085 = $204

Finally, you would debit sales tax payable for $204 and credit sales tax revenue for $204 to reflect the amount owed for sales tax.

Answer 2

The Journal entry is as follows:

Accounts receivable A/c Dr. $2,604

To Sales $2,400

To Sales Tax Payable $204

(To record the sales and sales tax payable.)

Workings:

Sales Tax Payable:

= state sales tax + local sales tax

= ($2,400 × 6%) + ($2,400 × 2.5%)

= $144 + $60

= $204