Furniture World is required by law to collect and remit sales taxes to the state. If Furniture World has $78,000 of cash sales that are subject to a 6% sales tax, what is the journal entry to record the cash sales?

Question

Quizplus · Accepted Answer

The journal entry to record cash sales subject to sales tax is to debit Cash for the total amount collected ($82,680) and credit Sales for the amount of the sale ($78,000) and Sales Taxes Payable for the amount of the tax collected ($4,680). Therefore, choice B is the correct answer. Choice A is incorrect because it incorrectly debits Accounts Receivable instead of Cash. Choice C is incorrect because it incorrectly debits Sales Taxes Payable before recording the cash received. Choice D is incorrect because it incorrectly credits Sales for the net amount (after sales tax) instead of the gross amount of sales, and incorrectly debits Sales Taxes Payable by the same amount. Choice E is incorrect because it ignores the immediate recording of the sales tax liability.

Furniture World Is Required by Law to Collect and Remit