Explanation Sales Tax Payable: Sales tax is a tax on the goods and services for the retail sale made by the retailers to the consumers. The tax amount thus collected is due to be paid to the government entities. The retailers collects the tax from the consumers over and above the list price of the product and service they provide, which is computed as a percentage on the amount of sale. This collected sales tax amount is considered as a current liability, since the retailer is supposed to deposit to the government within one year. Prepare journal entry to record the cash sales with sales tax due. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) March 31 Cash 56,680 Sales Revenue 52,000 Sales Tax Payable 4,680 (To record the cash sales with sales tax due) Table (1) Cash is an asset and increased, so debit it for $56,680. Sales Revenue is a component of stockholders’ equity and increased it, so credit for $52,000. Sales Tax Payable is a liability and increased, so credit it for $4,680...

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ISBN: 9780134728858

Author: Kemp

Publisher: PEARSON CO

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Chapter 9, Problem 16AE

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Journalize the following transactions.

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Solution Summary: The author explains that sales tax is a tax on the goods and services for the retail sale made by the retailers to the consumers.

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