During December, Far West Services makes a $4,200 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. (Note: the sales tax amount is in addition to the credit sale amount.) Record sales and sales tax payable. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.).

Question

Business

Dominique Simpson

2 September, 15:54

During December, Far West Services makes a $4,200 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. (Note: the sales tax amount is in addition to the credit sale amount.) Record sales and sales tax payable. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.).

+3

Answers (1)

Know the Answer?

Leia · Answer 1

Answer

Debit Accounts receivable $4,200

Credit Revenue account $3,870.97

Credit State Sales tax payable $232.26

Credit local Sales tax payable $96.77

Explanation:

When revenue is earned but cash is yet to be received and sales tax are to be accounted for at 8.5%, the entries required are;

Debit Accounts receivable 108.5%

Credit Revenue account 100%

Credit Sales tax payable 8.5%

Given that the sales tax amount is in addition to the credit sale amount, let the sales revenue be R

6% * R + 2.5% * R + R = $4,200

1.085R = $4200

R = $3870.97

States tax = 6% * $3870.97

=$232.26

Local tax = 2.5% * $3870.97

= $96.77