Valerie runs a business that is registered for sales tax. on 28 September, the business purchase goods on credit for $9400, inclusive of tax at 20% how would this purchase recorded in the accounts?
A Debit purchase $ 7520, Debit sales tax $1880 , Credit Payable $9400
B Debit purchase $ 7520, Debit sales tax $1880 , Credit Cash $9400
C Debit purchase $ 7833, Debit sales tax $1567, Credit Payable $9400
D Debit purchase $ 7833, Debit sales tax $1567, Credit Payable $9400
the answer is D but i really cant figure it out how?
Net cost + tax = gross cost
100 + 20 = 120
If the gross cost is 9400 the net cost would be 9400 x 100/120 = 7833
The sales tax in 7833 x 0.2 = 1567.
Dr purchases 7833
Dr tax 1567
Credit parables 9400
thanks for the help sir.
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