Which of the following represents the impact of a taxable cash sale of $500 on t

Question

Which of the following represents the impact of a taxable cash sale of $500 on the accounting equation if the sales tax rate is 4%7 Multiple Choice None of these answer chaices is correct An increase to cesh for $500, an increase to sales tax payable for $20. and an increase to sales revenue for $480 An increase to cash for $520, an increase to sales tax payable for $20, and an increase to sales revenue for $5oo An increase to cash for $520, an increase to sales tax expense for $20, and an increase to sales revenue for $500

Explanation / Answer

We will understand the question with the help of Journal Entry

Cash A/c.....Dr $520

To Sales A/c....Cr $500

To Sales Tax Payable A/c.....Cr $20

Keeping in mind the above Journal entry the Correct Answer would be OPTION 3

An Increase in Cash for $520, Increase in Sales Tax Payable $20 and Increase in Sales Revenue $500

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