During December, Far West Services makes a $2,400 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.

The Journal entry is as follows:

Accounts receivable A/c Dr. $2,604

To Sales $2,400

To Sales Tax Payable $204

(To record the sales and sales tax payable.)

Workings:

Sales Tax Payable:

= state sales tax + local sales tax

= ($2,400 * 6%) + ($2,400 * 2.5%)

= $144 + $60

= $204