- This topic has 3 replies, 2 voices, and was last updated 11 years ago by
.
-
Posts
-
dear mr tutor,
i am struggling to solve this question,your hand would be much appreciated.the question goes;
If sales tax (including sales tax) amounted to $27 612.50, and purchases(excluding sales tax) amounted to $18000, the balance on sales tax account ,assuming all items are subject to sales tax at 17.5%, would be ? please include amount and entry.i tried to solve this question by calculating difference in sales tax included (i.e sales and purchases ) but the answer in the book is different,i dont understand how i am expected to approve such a question.help please
If sales including sales tax are 27612.50, then the sale tax included is 0.175/1.175 x 27612.50 = 4112.50
If purchases excluding sales tax are 18,000, then the sales tax will be 17.5% x 18,000 = 3150.00.
So the net amount owing to the state is 4112.50 – 3150.00 = $962.50
(I will give you the entries, but they are really not needed – there is very little actual double entry asked for in the exam! Computers do the double entry in real life – what the exam tests is what the accountant is needed for – to sort out the amounts involved.
For the sales:
Dr Receivables 27612.50
Cr Sales 23500.00
Cr Sales Tax 4112.50For the purchases:
Dr Purchases 18000.00
Dr Sales Tax 3150.00
Cr Payables 21150.00
- You must be logged in to reply to this topic.