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A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount recorded as sales? (c) What is the amount debited to Accounts Receivable? (d) What is the title of the account to which the $2,880 ($36,000 × 8%) is credited?
Financial Accounting
Solutions
Financial Accounting
A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount recorded as sales? (c) What is the amount debited to Accounts Receivable? (d) What is the title of the account to which the $2,880 ($36,000 × 8%) is credited?
(a)
Describe whether sales tax should recorded at the time of slae or at the time of payment.
Explanation of Solution
Sales is an activity of selling the merchandise inventory of a business.
Record the sale of merchandise inventory on account.
| Date | Accounts and Explanation | Debit ($) | Credit ($) |
| Accounts Receivable | XX | ||
| Sales Revenue | XX | ||
| &... |
(b)
Describe the amount that is recorded as sales.
(c)
Calculate the amount that is debited to accounts receivable.
(d)
Describe the the title of the account to which $2,880 is credited.
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