The ACCT 201 Co. sold merchandise on account to a customer for $500 and also collected an 8% sales tax for the state of Wa. Sales taxes collected from all customers are payable to the state on a monthly basis. The cost of the merchandise sold was $200. The entry to record the sale and collection of sales tax would be:

A. Dr. Accounts Receivable $500; Cr. Sales $460; Cr. Sales $40

Dr. Cost of Merchandise Sold $240; Cr. Merchandise Inventory $200; Cr. Sales $40

B. Dr. Accounts Receivable $500; Cr. Sales $500

Dr. Cash $40; Cr. Sales Tax Payable $40

C. Dr. Accounts Receivable $540; Cr. Sales $500; Cr. Sales Tax Payable $40

Dr. Cost of Merchandise Sold $200; Merchandise Inventory $200

D. Dr. Merchandise Inventory $700; Cr. Sales $700; Cr. Sales Taxes $80

E. None of the above entries are correct.