Question

Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $82,680 of cash receipts, and operates in a state with a 6% sales tax, what is the journal entry to record the cash sales

Answer 1

Answer and Explanation:

The journal entry to record the cash sales is shown below:

Cash  $82,680  

         To Sales  $78,000    ($82,680 × 100 ÷ 106)

         To Sales taxes payable $4,680  ($82,680 × 6 ÷ 106)

(Being the cash sales is recorded)

Here cash is debited as it increased the assets while on the other hand the sales and sales tax payable is credited as it increased the revenue and liability