Tennis Shoe Warehouse operates in a state with a 6.5% sales tax. For convenience, TennisShoe Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collectedfrom each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales taxes,a. net income will be understated and liabilities will be overstated.b. net income will be overstated and liabilities will be overstated.c. net income will be overstated and liabilities will be understated.d. net income will be understated and liabilities will be understated.
Tennis Shoe Warehouse operates in a state with a 6.5% sales tax. For convenience, TennisShoe Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collectedfrom each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales taxes,a. net income will be understated and liabilities will be overstated.b. net income will be overstated and liabilities will be overstated.c. net income will be overstated and liabilities will be understated.d. net income will be understated and liabilities will be understated.
Chapter24: Multistate Corporate Taxation
Section: Chapter Questions
Problem 35P
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Tennis Shoe Warehouse operates in a state with a 6.5% sales tax. For convenience, Tennis
Shoe Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collected
from each customer. If Tennis Shoe Warehouse fails to make an adjustment for sales taxes,
a. net income will be understated and liabilities will be overstated.
b. net income will be overstated and liabilities will be overstated.
c. net income will be overstated and liabilities will be understated.
d. net income will be understated and liabilities will be understated.
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