Question

During December, Far West Services makes a $1,600 credit sale. The state sales tax rate is 6% and the local sales tax rate is 2.5%. (Note: the sales tax amount is in addition to the credit sale amount.) Record sales and sales tax payable.

Journal Entry Worksheet

Answer 1

Journal Entry of Far West Services

Dr Account Receivable 1,736

(1,600+136)

Cr Sales Revenue 1,600

Cr Sales tax payable 136

Step-by-step explanation:

Since Far West Services makes a $1,600 credit sale this means we have to Debit Account Receivable with 1,736 (1,600+136) and Credit Sales Revenue with 1,600 as well as Credit Sales tax payable with 136.

Calculation of Sales tax payable

State sales tax rate is 6% + Local sales tax rate is 2.5%. =8.5%

1,600 X 0.0825%

= 136