A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $420,000, what is the amount of the sales taxes owed to the taxing agency?
A) $400,000
B) $420,000
C) $21,000
D) $20,000

Question

Quizplus · Accepted Answer

The sales revenue includes both the sales price and the sales tax. If $420,000 is the total, then the sales price is $420,000 / 1.05 = $400,000. The sales tax is 5% of $400,000, which is $20,000.

A Retail Store Credited the Sales Revenue Account for the Sales