sale of merchandise on account for $36,000 is subject to an 8% sales tax. a. Should the sales tax be recorded at the time of sale or when payment is received? b. What is the amount recorded as sales? $ c. What is the amount debited to Accounts Receivable? $ d. What is the title of the account to which the $2,880 ($36,000 * 8%) is credited?

Question

Business

Israel Barber

19 July, 10:18

sale of merchandise on account for $36,000 is subject to an 8% sales tax. a. Should the sales tax be recorded at the time of sale or when payment is received? b. What is the amount recorded as sales? $ c. What is the amount debited to Accounts Receivable? $ d. What is the title of the account to which the $2,880 ($36,000 * 8%) is credited?

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Tia Bradley · Answer 1

a. Sales tax to be recorded at the time of sales.

b. 36000

c. 38880

d. Sales tax payable

Explanation:

a. Because sales tax is subjected to sales so it is liability of seller to charge sales tax to customer.

b. Sales = $36000

c. Account receivable = [36000 + (36000*8%) ]=36000+2880=38880

Entry: Dr Account receivable 38880

Sales 36000

Sales tax payable 2880

d. Sales tax payable, it is liability for a seller to refund to government treasury.