Question

sale of merchandise on account for $36,000 is subject to an 8% sales tax. a. Should the sales tax be recorded at the time of sale or when payment is received? b. What is the amount recorded as sales? $ c. What is the amount debited to Accounts Receivable? $ d. What is the title of the account to which the $2,880 ($36,000 × 8%) is credited?

Answer 1

Answer:

a.Sales tax to be recorded at the time of sales.

b.36000

c.38880

d.Sales tax payable

Explanation:

a.Because sales tax is subjected to sales so it is liability of seller to charge sales tax to customer.

b. Sales = $36000

c.Account receivable = [36000+(36000*8%)]=36000+2880=38880

       Entry: Dr  Account receivable  38880

                                                      Sales                  36000

                                                   Sales tax payable  2880

d. Sales tax payable, it is liability for a seller to refund to government treasury.