Which of the following represents the impact of a taxable cash sale of $1,080 on

Question

Which of the following represents the impact of a taxable cash sale of $1,080 on the accounting equation if the sales tax rate is 5%?

An increase to cash for $1,134, an increase to sales tax expense for $54, and an increase to sales revenue for $1,080.

An increase to cash for $1,134, an increase to sales tax payable for $54, and an increase to sales revenue for $1,080.

None of these answer choices is correct.

An increase to cash for $1,080, an increase to sales tax payable for $54, and an increase to sales revenue for $1,026.

Explanation / Answer

Answer is An increase in cash for $1134, an increase to Sales tax payable $54 and an increase in sales revenue for $1080.

Explanation:

Taxable cash sales (amounting to Net sales revenue): $1080

Add: Tax collected @5% (amounting to Sales tax payable): $ 54

Total cash collection (increase of cash balance): $ 1134

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