- This topic has 3 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
Hi John. I hope you are well. Could you please explain the question 80 from the Kaplan kit. The answer is not very explanatory. Question is below.
The following transactions took place during Alan’s first month of trading:
? Credit sales of $121,000 exclusive of sales tax
? Credit purchases of $157,110 inclusive of sales tax
? Cash payments to credit suppliers of $82,710 inclusive of sales taxAll transactions are subject to sales tax at 20%.
What was the balance on Alan’s sales tax account at the end of his first month of trading?
I do not have the Kaplan Kit – only the BPP Revision Kit.
However there is tax charged on the sales of 121,000 x 20% = $24,200
There is tax suffered on the purchases of 20/120 x 157,110 = $26,185Therefore at the end of the month there is tax owing to Alan from the state (and so a debit balance) of 26185 – 24200 = $1,985
There is obviously no relevance for sales tax of any payments to credit suppliers because the tax was accounted for when the invoices were received.
I suggest that you watch my free lectures on Sales Tax. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thanks John. I will have a look at the lectures again but thanks for the explanation.
- The topic ‘Sales tax’ is closed to new replies.