**Question on Recording Sales with State Sales Tax***Merchandise is sold for cash. The selling price of the merchandise is $2,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include a credit to:*- a. Sales for $1,860- b. Cash for $2,000- c. Sales Tax Payable for $140- d. Sales for $2,140**Explanation:**When merchandise is sold and subject to sales tax, the total amount collected includes both the selling price and the sales tax. In this case, a 7% tax on $2,000 results in $140 of tax, making the total cash received $2,140. The correct entry involves crediting the sales account and the sales tax payable as appropriate.

Solution: Sales will be credited by = $2,000 Sales tax payable will be credited by = 2000*7% = $140…

Answered: Merchandise is sold for cash. The…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Merchandise is sold for cash. The selling price of the merchandise is $2,000 and the sale is subject to a 7% state sales tax. credit to O a. Sales for $1,860 Ob. Cash for $2,000 Oc. Sales Tax Payable for $140 Od. Sales for $2,140