Sara's Jewelry sold 20 necklaces for $ 35 each to a credit customer. The invoice included a 5% sales tax and payment terms of 4/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the original sale would include:

The journal entry for recording the original sale is shown below:

Explanation:

The journal entry for recording the original sale is as follows:

Accounts receivable A/cDr $735

         Sales Tax A/cCr $35

          Sales A/cCr $700

As sales is made on credit so the accounts receivable account will be debited against the Sales account, which is credited. And there is sales tax charged on selling necklaces, which is credited to the sales tax account.

Computation of Sales Tax as:

Sales tax = Selling amount × Tax

where

Selling amount = Number of Necklaces × Price

= 20 × $35

= $700

So,

Sales tax = $700 × 5%

Sales tax = $35

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