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Question:
Ali is registered for Sales Tax.
During June, he sells good with a tax exclusive price of $750 to KAY on credit.
As KAY is buying a large quantity of goods, ALI reduce the price by 5%.
ALI also offers a discount of another 2% if KAY pays within 10 days.
KAY does not pay within the 10 days.
If sales tax is charged at 20% what amount should ALI charge on this transaction?
A. 142.50
B. 150.00
C. 147.15
D. 139.65The correct asnwer is D.
I worked out the answer is A $142.50
$750.00 – 5% = $712.50 x 0.20 = $142.50.
My understanding is, since KAY not pay within 10 days, so no need to take the 2% in calculation.But the answer calculation is show up like this : (712.50 – 2%) x 20% = $139.65.
This exercise i took from online, which is for FA/FFA one..
Hence, I would seek to tutor assist, since the question aldy told KAY not pay within 10days, so we no need to include the 2% in the calculation, isn’t ?The answer in your book is correct.
The tax is calculated on the amount after all discounts (including discount for early payment) when the invoice is prepared.
Even if the customer does not pay within 10 days (as is the case here) and therefore does not get the discount, then the tax is not recalculated.
This may seem strange and that the state is losing tax, but it is not really a problem partly because discounts for early payment are only small but also (more importantly) because most of the customers offered it will also be registered for sales tax, so the same amount that the seller is charging (and paying to the state) will be the amount suffered by the customer (and claimed back from the state).
Thanks you Teacher.
May i know, this type of question will come out in ACCA exam?
since i haven’t saw this type of exam in my BPP Kit 2023-2024..
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