Metropolitan Masonry had sales on account of $7,700 which were subject to state sales tax of 10%. The entry to record the sales would be to:
A)debit Accounts Receivable, $8,470; credit Sales revenue, $7,700; credit Sales tax payable, $770.
B)debit Accounts Receivable, $8,470; credit Sale revenue, $8,470.
C)debit Accounts Receivable, $7,700; credit Sales revenue, $7,700.
D)debit Accounts Receivable, $7,700; debit Sales tax payable, $770; credit Sales revenue, $8,470.

Question

Quizplus · Accepted Answer

When sales are subject to sales tax, the total amount is divided into two parts: Sales Revenue and Sales Tax Payable. The Sales Revenue part is the actual amount of sales made, and the Sales Tax Payable part is the amount of tax that needs to be paid to the state. Therefore, the entry to record the sales made on account would be to debit Accounts Receivable ($8,470 = $7,700 + $770) to reflect the amount owed by customers, credit Sales Revenue ($7,700) to reflect the actual sales made, and credit Sales Tax Payable ($770) to reflect the tax amount owed to the state.

Metropolitan Masonry Had Sales on Account of $7,700 Which Were