Annual Operations Company operates in a state where there is a 6% sales tax.If a customer pays cash for merchandise with a sales price of $500,Annual Operations would record the transaction using which of the following journal entries?
A)
$\begin{array}{lccc}
\text { Cash } & 500 & \
\text { Sales } & &500 & \
\end{array}$
B)
$\begin{array}{lccc}
\text { Cash } &500 \
\quad \text { Sales Tax Payable } & &30\
\text { Sales } & &470 \
\end{array}$
C)
$\begin{array}{lccc}
\text { Cash } &500 & \
\text { Sales Tax Expense } & 30 \
\quad \text { Sales Tax Payable } & & 30 \
\text { Sales } & &500 \
\end{array}$
D)
$\begin{array}{lccc}
\text {Cash } & 530 \
\quad \text { Sales Tax Payable } & & 30 \
\text { Sales } && 500 & \
\end{array}$
E)
$\begin{array}{lccc}
\text { Cash } &530 & \
\text { Sales Tax Expense } & 30 \
\text { Sales Tax Payable } & & 30 \
\text { Sales }& & 530
\end{array}$

Question

Annual Operations Company operates in a state where there is a 6% sales tax.If a customer pays cash for merchandise with a sales price of $500,Annual Operations would record the transaction using which of the following journal entries? 
A)
  $\begin{array}{lccc}
\text {  Cash } & 500 & \
\text { Sales } & &500 & \
\end{array}$
B) 
 $\begin{array}{lccc}
\text {  Cash } &500 \
\quad \text { Sales Tax Payable } & &30\
\text { Sales } &  &470 \
\end{array}$
C) 
$\begin{array}{lccc}
\text {  Cash } &500 & \
\text { Sales Tax Expense } &  30 \
\quad \text { Sales Tax Payable } & & 30 \
\text { Sales } & &500 \
\end{array}$
D) 
 $\begin{array}{lccc}
\text {Cash } & 530 \
\quad \text { Sales Tax Payable } & & 30 \
\text { Sales } && 500 & \
\end{array}$
E)
 $\begin{array}{lccc}
\text {  Cash } &530 & \
\text { Sales Tax Expense } &  30 \
\text { Sales Tax Payable } & & 30 \
\text { Sales }& & 530
\end{array}$

Quizplus · Accepted Answer

The correct journal entry for a cash sale that includes sales tax is to debit Cash for the total amount received (including sales tax), credit Sales for the amount of the sale before tax, and credit Sales Tax Payable for the amount of the sales tax collected. This reflects the collection of sales tax on behalf of the state, which is not an expense but a liability until remitted to the state.

Annual Operations Company Operates in a State Where There Is Cash 500 Sales 500\begin{array}{lccc}\text { Cash } & 500 & \\\text { Sales } & &500 & \\\end{array} Cash Sales ​500​500​​

Annual Operations Company Operates in a State Where There Is $\begin{array}{lccc}\text { Cash } & 500 & \\\text { Sales } & &500 & \\\end{array}$