Question

During December, Far West Services makes a $3,200 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

Answer and Explanation:

The journal entry for the recording of sales and sales tax payable is shown below:

Accounts Receivable $3,472  

           To Sales  $3,200

           To Sales tax payable $192   ($3,200 × 6%)

            To Local tax payable $80     ($3,200 × 2.5%)

(Being the sales and sales tax payable is recorded)

For recording this we debited the account receivable as it increased the asset and credited the sales, sales tax and local tax as it increased the revenue and liabilities