Answer:
a Debit Accounts receivables $27,720
Credit Sales revenue $26,400
Credit Sales tax $1,320
Being entries to record credit sales
b. Debit Cash account $27,195
Credit Sales revenue $25,900
Credit Sales tax $1,295
Being entries to record cash sales
Explanation:
The sales made by an entity may involve the immediate or later payment of tax. Either way, both are usually subject to sales tax. Tax on sales is known as output tax. To account for this,
Debit Account receivables/Cash 105%
Credit Sales 100%
Credit Sales tax 5%
For the credit sale, the sales tax applicable
= 5% × $26,400
= $1,320
Total receivable = $26,400 + $1,320
=$27,720
For the cash sales, the sale tax is
= 5/105 × $27,195
= $1,295
Actual sale = $27,195 - $1,295
= $25,900
