Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $6,500 of cash sales that are subject to an 9% sales tax, what is the journal entry to record the cash sales?

Journal Entry

General Ledger Dr. Cr.

Cash $7,085

Sales Tax Payable $585

Sales $6,500

Explanation:

Sales tax is the amount of tax collected by the business on the taxable sales from customers on behalf of government and pay it to government after that. Sales tax will be included in the cash received from the customer and recorded as the payable for the business.

Sales Value = $6,500

Sales Tax = 9%

Sales inclusive of Sales tax = $6,500 x 109% = $6,500 x 1.09 = $7,085