Question

A customer is considering buying a television set with a retail price of $2,000. The customer asks the store manager if the store will consider paying the sales tax so that the total cash payment is $2,000. The sales tax is 8%. The store manager agrees to accept $2,000 cash. What should the accountant credit in this transaction

Answer 1

Answer:

Credit sales $1,852 and credit sales tax payable $148

Explanation:

When a sale is made the sales of the business increases and so sales is credited while inventory goes down and is debited.

In this scenario a customer made a purchase of $2,000 so there is an increase in sales of the business.

However the business has agreed to pay the tax on the sale with sale amount and tax totalling $2,000.

2,000 = Sale amount + Sale amount (0.08)

2,000 = 1.8 (sale amount)

Sale amount = 2,000 ÷ 1.08 = 1,851.85 ~ $1,852

Sales tax = 2,000 - sales amount

Sales tax = 2,000 - 1,852 = $148

Sir we will Credit sales $1,852 and credit sales tax payable $148

Answer 2

Answer: D. $1,852 $148

Explanation:

The $2,000 payment will have included the sales tax already so the sales price will need to be calculated.

x * ( 1 + tax) = 2,000

x * ( 1 + 8%) = 2,000

x = 2,000/1.08

x = $1,852

Sales tax is therefore;

= 2,000 - 1,852

= $148