HHEC.com is responsible for collecting sales tax on the products it sells. In addition, it often collects money from customers for goods that are on backorder. Unfortunately, Sophia is unfamiliar with how these transactions should be recorded.

HHEC.Com enters sales and sales taxes separately in its computerized accounting system. HHEC accounting system shows total sales of $420,00, and the sales tax rate is 5%. On November 1, collects 120,000 in advance for a 12-month subscription to its cleaning products.

Prepare the entry to record the sales transactions and the related sales taxes. Prepare the entry in November for the receipt of the subscription revenue. Then prepare the adjusting entry at December 31, Year 3 to record the subscription/sales revenue earned in Year 3.

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