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Tax

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Tax

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • August 15, 2016 at 4:44 pm #333355
    firelion28
    Member
    • Topics: 159
    • Replies: 83
    • ☆☆☆

    Cloud buys goods with a list price of $50,000 from Moon. Cloud receives a trade discount of 12% from Moon on all its purchases and a further 4% discount if payment is made within 10 days. Sales tax is charged at 15%.
    What figure should Cloud show in Moon’s personal account to record its purchase?

    Sir how will we do this

    THe answer is 50336, but how?

    August 15, 2016 at 5:11 pm #333369
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54705
    • ☆☆☆☆☆

    Does your book not show the workings for their answer?

    After the trade discount they would be charged (ignoring VAT) 50,000 – (12% x 50,000) = 44,000
    The tax is charged after all discounts, and so would be 15% x (44,000 – (44,000 x 4%) = 6,336.

    The amount recorded in receivables would be ignoring the cash discount (because they would not know whether or not the payment would be made in time) and so would be 50,000 – (12% x 50,000) + 6,336 = 50,336.

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