Question

g On July 31, Larry's Home Improvement Big Box Store sold materials to a contractor for $8,000 that are subject to a 6.25% sales tax. Compute the amount of the sales tax collected, and use this to prepare the journal entry needed to record the sale of the materials on July 31. You may ignore the Cost of Goods Sold/Merchandise Inventory entry that would normally be made at the same time. You may copy and paste this template provided into the response box if you desire, or you may simply enter the journal entry in the response box (be sure to include the date, and indent account names and amounts where appropriate).

Answer 1

July 31, 202x, materials sold to contractor Y

Dr Cash 8,500

Cr Sales revenue 8,000

Cr Sales tax payable 500

Step-by-step explanation:

A business is required to collect sales taxes and must generally pay them sometime during the next month (the specific date varies depending on the state). The business must record an asset, either cash or accounts receivable, and must also record a liability which is sales tax payable.