Cantrell Company is required by law to collect and remit sales taxes to the stat

Question

Cantrell Company is required by law to collect and remit sales taxes to the state. If Cantrell has $7,000 of cash sales that are subject to an 6% sales tax, what is the journal entry to record the cash sales?

Debit Cash $7,000; credit Sales $7,000; and record the taxes when paid.

Debit Sales Taxes Payable $420; debit Cash $6,580; credit Sales $7,000.

Debit Cash $7,420; credit Sales $7,000; credit Sales Taxes Payable $420.

Debit Accounts Receivable $7,420; credit Sales $7,000; credit Sales Taxes Payable $420.

Debit Cash $7,000; credit Sales $6,580; credit Sales Taxes Payable $420.

Explanation / Answer

Debit Cash $7,000; credit Sales $6,580; credit Sales Taxes Payable $420.

Sales tax=7,000*6%=$420.

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