Question

Stellar Corporation made credit sales of $26,400 which are subject to 5% sales tax. The corporation also made cash sales which totaled $27,195 including the 5% sales tax. a. Prepare the entry to record Stellar's credit sales.b. Prepare the entry to record Stellar's cash sales.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

a. Account receivable A/c Dr $27,720

               To Sales revenue A/c $26,400

               To Sales tax payable A/c $1,320   ($26,400 × 5%)

(Being the credit sales is recorded)

b. Cash A/c Dr $27,195

               To Sales revenue A/c $25,900  ($27,195 × 100 ÷ 105)

               To Sales tax payable A/c $1,295  

(Being cash sales is recorded and the remaining balance is credited to the sales tax payable account)