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kindly assist
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?
A $6,470.00
B $11,910.00
C $14,047.50
D $13,162.17The answer is B= $11910.00
form my understanding the closing entry of debit $2720 is cash paid to tax authorities, why then is it credited again, it is credited because it was paid later during the month. Help me understand the movement of $2720 from debit to credit. show me the full double entry of $2720 ( if its credited where was it debited) and what does the debit entry mean? and what proof do we have that $2720 was paid later or not paid later during that month?
The tax on the sales is 15/115 x 109250 = 14250
The tax on the purchases is 15% x 64000 = 9600At the start of the month they were owing 4540 to the state.
If that had not paid anything during the month, they would have been owing 4540 + 14250 – 9600 = 9190 at the end of the month.In fact, they were being owed 2720 by the state at the end of the month and so it must have meant that they had paid 9190 + 2720 = 11910. (They had paid more than they were supposed to which is why they were owed money back by the state.)
I am not going to show you the double entries!! You should not answer this kind of question using t-accounts – it is wasting time and there is very little testing of double entries in the exam. If you want to see the double entries then you must watch my free lectures.
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