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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?

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Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436

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Chapter
Section
BuyFindarrow_forward

Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305088436
Chapter 6, Problem 17E
Textbook Problem
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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?

(a)

To determine

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.

DateAccounts and ExplanationDebit ($)Credit ($)
 Accounts ReceivableXX 
            Sales Revenue XX
     &...

(b)

To determine

Describe the amount that is recorded as sales.

(c)

To determine

Calculate the amount that is debited to accounts receivable.

(d)

To determine

 Describe the the title of the account to which $2,880 is credited.

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Chapter 6 Solutions

Financial Accounting
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