Question

Brief Exercise 10-3 Greenspan Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $11,880. All sales are subject to a 8% sales tax. Compute sales taxes payable. Sales taxes payable$ Make the entry to record sales taxes payable and sales. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer and Explanation:

The computation of the sales tax payable is shown below:

= Total sales × sales tax rate ÷ (100 + sales tax rate)

= $11,880 × 8% ÷ (100 + 8%)

= $880

Now the journal entry is

Cash $11,880

            To Sales Revenue           $11,000

            To Sales Tax Payable $880

(Being the sales tax payable and sales is recorded)

For recording this we debited the cash as it increased the assets and credited the sales revenue and sales tax payable as it also increased the revenue and liabilities