Tax problem

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  • Avatar of alisharifazadeh
    alisharifazadeh
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    The following information relates to Eva Co’s sales tax for the month of March 20X3:
    Sales (including sales tax) 109,250
    Purchases (net of sales tax) 64,000
    Sales tax is charged at a flat rate of 15%. Eva Co’s sales tax account showed an opening credit balance of
    $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of the month.
    What was the total sales tax paid to regulatory authorities during the month of March 20X3?


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    littlestart
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    My answer is 6470.
    Draw a T account would help to sort this out

    sales tax for this month = 14250
    x +15%x = 109250 so x= 109250 / 1.15 = 95000
    15%x = 95000*15% = 14250
    Purchase tax for this month = 64000 *15% = 9600
    sales tax account
    Dr side = 9600 + 2720 = 12320
    Cr side = 4540 + 14250 = 18790
    the difference = 18790 – 12320 =6470 which is the amount that we need to pay to authorities as output sales tax > input sales tax.
    Hope the answer is correct.


    Avatar of mahdiniaacc
    mahdiniaacc
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    @littlestart said:
    Hope the answer is correct.

    of course, you are right.

    thank you


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    vrushali
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    hi
    but i think that the closing debit balance is given and so,
    Dr- 9600
    Cr-4540+2720+14250=21510
    =11910 on Dr..ie closing credit balance


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    joseph89
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    yes I had the same question, I was going to post it…
    vrushali is write the answer is 11910. this question is in bpp mock exam 1.
    but I can’t understand why when they said that there is a closing DEBIT balance of $2,720 at the end of the month, they put it on the T account on the credit side?


    Avatar of mahdiniaacc
    mahdiniaacc
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    @vrushali said:
    hi
    but i think that the closing debit balance is given and so,
    Dr- 9600
    Cr-4540+2720+14250=21510
    =11910 on Dr..ie closing credit balance

    I’m so sorry for my wrong post.
    As vrushali said the answer is 11,910
    Actually, I didn’t draw the T account for this question and posted my answer just by reading the prior answer. The question said that the closing balance is a debit figure of 2,720 so it means that 2,720 should be account as a credit c/f figure because the b/f is a debit figure.

    Beg your pardon again


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    joseph89
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    can you please explain this

    Quote:
    The question said that the closing balance is a debit figure of 2,720 so it means that 2,720 should be account as a credit c/f figure because the b/f is a debit figure.

    in more details if it’s possible.
    because I thought that when it’s said that closing balance is debit in T account it must be on debit side …


    Avatar of mahdiniaacc
    mahdiniaacc
    Member
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    Please forget temporarily this question and study other questions which say about ” closing balance “. Can you remember any debit closing balance that should be accounted in debit side of account?
    I think when a question says ” debit closing balance ” its carried forward should be credit. In fact a closing balance is just a balance so it’s not an entry like carried forward in the accounts’ turnover.
    I hope you got what I want to say.


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    joseph89
    Participant
    • Topics: 14
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    I had only two of such questions … one is this :D
    but I understood what you want to say. thanks a lot

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