Question

Jensen Company has cash proceeds from sales of $8,400. This amount includes $400 of sales taxes. Give the entry to record the proceeds. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer:

Debit Cash account          $8,400

Credit Sales account         $8,000

Credit Sales tax payable      $400

Being entries to record cash proceeds from sale.

Explanation:

Since total cash received from the sale was $8,400, a debit entry for this amount is posted to the Cash account.

Of the amount received, $400 is for sales tax. This is a liability to the organization and as such a credit entry for sales tax payable of $400 is recorded until it is remitted.

The balance of $8000 is the actual amount to be recognized as sales.