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7 March, 23:28

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $8,500 of cash sales that are subject to an 7% sales tax what is the journal entry to record the cash sales?

A) Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.

B) Debit Sales Taxes Payable $595; debit Cash $7.905: credit Sales $8,500.

C) Debit Cash $9,095 credit Sales $8,500; credit Sales Taxes Payable $595

D) Debit Accounts Receivable $9,095; credit Sales $8.500; credit Sales Taxes Payable $595.

E) Debit Cash $8,500, credit Sales $8.500; and record the taxes when paid.

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  1. 7 March, 23:30
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    The journal entry to record the cash sales would be;

    A. Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.

    Explanation:

    A. Entries of the cash sales

    1. Account (cash sales)

    Cash=$8,500

    Debit cash=$8,500

    Credit this account=$0

    2. Account (credit sales)

    Credit sales=8,500 - (7% of 8,500)

    Credit sales=8,500-595=$7,905

    Credit sales account=$7,905

    Debit this account=$0

    3. Account (Credit sales taxes payable)

    Credit sales taxes payable=7% of $8,500

    Credit sales taxes payable = (7/100) * 8,500=$595

    Debit this account=$0

    This can be written as;

    Account Debit ($) Credit ($)

    Cash $8,500

    Credit sales account $7,905

    Credit sales taxes payable $595

    The journal entry to record the cash sales would be;

    Debit Cash $8,500, credit Sales $7.905: credit Sales Taxes Payable $595.
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