Question

Which of the following represents the impact of a taxable cash sale of $650 on the accounting equation if the sales tax rate is 4%?

Multiple Choice

• An increase to cash for $676, an increase to sales tax expense for $26, and an increase to sales revenue for $650.

• An increase to cash for $650, an increase to sales tax payable for $26, and an increase to sales revenue for $624.

• An increase to cash for $676, an increase to sales tax payable for $26, and an increase to sales revenue for $650.

• None of these answer choices is correct.

Answer 1

Answer- The following represents the impact of a taxable cash sale of $650 on the accounting equation if the sales tax rate is 4% = An increase to cash for $676, an increase to sales tax payable for $26, and an increase to sales revenue for $650.

The journal entry for such transaction are as follows-

EVENT	ACCOUNTS TITLES & EXPLANATION	DEBIT	CREDIT
		$	$
1	Cash	676
	Sales tax payable ($650*4%)		26
	Sales revenue		650
	(Being entry recorded for sales revenue)