The city of Lakeland levies a 2 percent tax on the value of all restaurant meals served to the public within the city limits. This year, the aggregate value subject to tax was $30.2 million, so current year revenue was $604,000. Lakeland plans to decrease the tax rate next year to 1.5 percent. Required:Compute next year’s restaurant tax revenue assuming next year’s tax base equals the current year base.Compute next year’s restaurant tax revenue assuming next year’s tax base increases to $38.3 million.Compute next year’s restaurant tax revenue assuming next year’s tax base increases to $43.3 million.

Tax is defined as a compulsory contribution to the state's or country's revenue which will be levied…

Answered: The city of Lakeland levies a 2 percent…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The city of Lakeland levies a 2 percent tax on the value of all restaurant meals served to the public within the city limits. This year, the aggregate value subject to tax was $30.2 million, so current year revenue was $604,000. Lakeland plans to decrease the tax rate next year to 1.5 percent.

Required:

Compute next year’s restaurant tax revenue assuming next year’s tax base equals the current year base.
Compute next year’s restaurant tax revenue assuming next year’s tax base increases to $38.3 million.
Compute next year’s restaurant tax revenue assuming next year’s tax base increases to $43.3 million.

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