Blue Skies Supplies does not keep separate records of revenues and sales taxes at the time of sale. The register totals for October 21 are \$20,776. All sales are subject to a 6% sales tax. If all cash receipts were originally included in Sales Revenue, the journal entry to adjust for sales taxes payable would include:

• A. A debit to Sales Taxes Payable for \$1,176
• B. A debit to Sales Tax Expense for \$1,246
• C. A credit to Sales Taxes Payable for \$1,176
• D. A credit to Sales Taxes Payable for \$1,246

Answer: (C)

Verified step by step guidance

1. Identify the total amount recorded as Sales Revenue, which includes both the actual sales and the sales tax. In this case, the total is \$20,776.
2. Determine the sales tax rate, which is given as 6%. This means that the sales tax is 6% of the actual sales amount.
3. Let the actual sales amount be represented by 'S'. The sales tax collected would then be 0.06 * S.
4. The total amount recorded, \$20,776, is the sum of the actual sales and the sales tax: S + 0.06 * S = \$20,776.
5. Solve the equation for 'S' to find the actual sales amount. Once 'S' is determined, calculate the sales tax by multiplying 'S' by 0.06. The journal entry will include a credit to Sales Taxes Payable for the calculated sales tax amount.