Which of the following represents the correct journal entry to record a taxable cash sale of $400 if the sales tax rate is 5%?
A)A debit to cash for $420,a debit to sales tax expense for $20,and a credit to sales revenue for $400.
B)A debit to cash for $400,a credit to sales tax payable for $20,and a credit to sales revenue for $380.
C)A debit to cash for $420,a credit to sales tax payable for $20,and a credit to sales revenue for $400.
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Sales tax collected = $400 × 5% = $20
Cash collected = Sale of $400 + Sales tax of $20 = $420
The transaction is recorded as a debit (increase)to cash of $420,the amount of the sale,plus the 5% sales tax collected,a credit (increase)to sales tax payable of $20,the amount owed to the state,and a credit (increase)to sales revenue of $400,the amount of the sale.

Which of the Following Represents the Correct Journal Entry to Record