Question

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? multiple choice debit cash $82,680; credit sales $78,000; credit sales taxes payable $4,680. debit cash $78,000; credit sales $73,320; credit sales taxes payable $4,680. debit sales taxes payable $4,680; debit cash $73,220; credit sales $78,000. debit cash $78,000; credit sales $78,000; and record the taxes when paid. debit accounts receivable $82,680; credit sales $78,000; credit sales taxes payable $4,680.

Answer 1

Answer: Debit cash $82,680; Credit sales $78,000; Credit sales taxes payable $4,680

Explanation:

First we find out the total amount of cash received which should include the taxes received.

Furniture World got $78,000 in sales and taxes of 6%.

That means that if we add the 6% we get,

= 78,000 ( 1 + 6%)

= 78,000(1.06)

= $82,680

The total amount of cash received was $82,680.

Cash as an asset will be debited so we debit cash for the entire amount of $82,680.

Sales are credited and since Furniture World sold goods worth $78,000 minus tax, this is what we include in Sales so debit Sales for $78,000.

Now Furniture World owes the government that 6% tax so we credit that amount to the Sales Tax Payable amount which will be,

$82,680 - $78,000 = $4,680.