Cantrell company is required by law to collect and remit sales taxes to the state. if cantrell has $8,500 of cash sales that are subject to an 7% sales tax what is the journal entry to record the cash sales?
a) debit cash $8,500, credit sales $7.905: credit sales taxes payable $595.
b) debit sales taxes payable $595; debit cash $7.905: credit sales $8,500.
c) debit cash $9,095 credit sales $8,500; credit sales taxes payable $595
d) debit accounts receivable $9,095; credit sales $8.500; credit sales taxes payable $595.
e) debit cash $8,500, credit sales $8.500; and record the taxes when paid.

The journal entry to record the cash sales would be;

A. Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.

Explanation:

A. Entries of the cash sales

1. Account(cash sales)

Cash=$8,500

Debit cash=$8,500

Credit this account=$0

2. Account (credit sales)

Credit sales=8,500-(7% of 8,500)

Credit sales=8,500-595=$7,905

Credit sales account=$7,905

Debit this account=$0

3. Account (Credit sales taxes payable)

Credit sales taxes payable=7% of $8,500

Credit sales taxes payable=(7/100)×8,500=$595

Debit this account=$0

This can be written as;

Account                                                      Debit ($)                         Credit ($)

Cash                                                             $8,500  

Credit sales account                                                                           $7,905

Credit sales taxes payable                                                                    $595

The journal entry to record the cash sales would be;

Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.

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