Answer
Debit Accounts receivable $4,200
Credit Revenue account $3,870.97
Credit State Sales tax payable $232.26
Credit local Sales tax payable $96.77
Explanation:
When revenue is earned but cash is yet to be received and sales tax are to be accounted for at 8.5%, the entries required are;
Debit Accounts receivable 108.5%
Credit Revenue account 100%
Credit Sales tax payable 8.5%
Given that the sales tax amount is in addition to the credit sale amount, let the sales revenue be R
6% * R + 2.5% * R + R = $4,200
1.085R = $4200
R = $3870.97
States tax = 6% * $3870.97
=$232.26
Local tax = 2.5% * $3870.97
= $96.77