Credit show the total sales revenue received by Taft for quarter ended March 31,1989

Debit show the sales tax remitted to the sales tax bureau as in Jan., sales tax collection exceeded $500.. However, we can take this sales tax paid as credit on our quarterly sales tax return !

Now, we simply have to calculate how much was the sales revenue and how much was the sales tax portion in the sales revenue.

This is the key hint in the question :-

All items are sold subject to a 6% state sales tax, which Taft collects and records as sales revenue.

It means that sales tax is included in sales revenue.

Assume sales revenue without sales tax = X

Now, applying mathematical equation :-

X + 6% of X = $27,560

Thus, X = $26,000

So, the solution is Sales revenue = $26,000

and, sales tax = 27560-26000= 1560

Sales tax already paid $600

Sales tax payable =  1560-600 credit taken= $960

It means that if in a month, sales tax collected exceeded $500, then the sales tax collected would be remitted by Taft to sales tax bureau(Govt) . This is perhaps as per the sales tax law of that specific state.

For Jan., sales tax collected = $600. ($10,600 includes $600 as per the above mathematical equation).

This $600 was then remitted to sales tax bureau by 20th Feb, however, shown as a separate debit so that it could be adjusted against the total sales tax payable for 1st quarter.

Thus,

Sales tax payable =  1560-600 credit taken= $960

The statement is important as it points out to calculate the final sales tax payable!