A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be

A sale of merchandise on account for $36,000 is subject to an 8% sales tax. (a) Should the sales tax be recorded at the time of sale or when payment is received? (b) What is the amount of the sale? (c) What is the amount debited to Accounts Receivable? (d) What is the title of the account to which the $2,880 ($36,000 × 8%) is credited?


Answer:
a. At the time of sale
b. $36,000
c. $38,880 [$36,000 + ($36,000 × 8%)]
d. Sales Tax Payable


Based on the data presented in Exercise 6-14, journalize Belarus Co.’s entries for (a) the purchase, (b) the return of the merchandise for credit, and (c) the payment of the invoice within the discount period.


Answer:

a.
 Merchandise Inventory 64,300
Accounts Payable—Sombrero Co. 64,300
b.
 Accounts Payable—Sombrero Co. 13,300
Merchandise Inventory 13,300
c.
 Accounts Payable—Sombrero Co. 51,000
Cash 49,980
Merchandise Inventory 1,020