Answer:
B) The accounts receivable balance is increased
Explanation:
When merchandise is sold on account and sales tax is also collected so
following entry is made:
Accounts receivable Debit
Sales Credit
Sales tax payable Credit
The above entry depicts that accounts receivable is debited so Option A is wrong as it calls for credit of accounts receivable.
Option C is also wrong as it states that sales is debited as a result of mentioned transaction.
Option D is wrong as Sales tax payable is recorded with an amount of sales payable to government (federal / state), total of both sales and sales tax is debited to accounts receivable with corresponding credit to sales and sales tax.
