Stellar corporation made credit sales of $26,400 which are subject to 5% sales tax. the corporation also made cash sales which totaled $27,195 including the 5% sales tax. a. prepare the entry to record stellar's credit sales. b. prepare the entry to record stellar's cash sales.

Explanation:

The journal entries are shown below:

a. Account receivable A/c Dr $27,720

               To Sales revenue A/c $26,400

               To Sales tax payable A/c $1,320   ($26,400 × 5%)

(Being the credit sales is recorded)

b. Cash A/c Dr $27,195

               To Sales revenue A/c $25,900  ($27,195 × 100 ÷ 105)

               To Sales tax payable A/c $1,295  

(Being cash sales is recorded and the remaining balance is credited to the sales tax payable account)

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