Dextra Computing sells merchandise for $18,000 cash on September 30 (cost of merchandise is $10,800). The sales tax law requires Dextra to collect 2% sales tax on every dollar of merchandise sold. Record the entry for the $18,000 sale and its applicable sales tax. Also record the entry that shows the payment of the 2% tax on this sale to the state government on October 15.

Dr. Cash       $18,360

Cr.  Sales      $18,000

Cr. Sales tax $360

Explanation:

Sales Tax is a tax which is charged to the consumer of the goods and received by the business on the behalf of the government and will be paid later. Sales tax is applicable on the list price of the product. Assuming the $18,000 is the list price of the merchandise sold.

Sales Tax = $18,000 x 2% = $360

The sales tax will be received from the customer with Sales value and recorded as a liability as it is to be paid to government on a due date.

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