Sales Tax: The Government levies sales tax on sale of goods or services by a retailer. Sales tax is generally based on the certain percentage of the sale amount and forms a part of Government revenue. The retailer needs to collect the same from the customer and remit it to the Government. Until the sales tax collected is remitted, it forms part of the current liabilities of the business. In case a business purchases goods, sales tax paid to the seller forms part of the cost of goods purchased. To explain: The recording of sales tax and if it is considered as business expense and the reason for the same

Question

Want to see the full answer?

Answer 1

Question

Chapter 11, Problem 3RQ

To determine

Sales Tax:

The Government levies sales tax on sale of goods or services by a retailer. Sales tax is generally based on the certain percentage of the sale amount and forms a part of Government revenue. The retailer needs to collect the same from the customer and remit it to the Government. Until the sales tax collected is remitted, it forms part of the current liabilities of the business. In case a business purchases goods, sales tax paid to the seller forms part of the cost of goods purchased.

To explain:

The recording of sales tax and if it is considered as business expense and the reason for the same

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Repsola is a drilling company that operates an offshore Oilfield in Feeland. Five yearsago, Feeland had a major oil discovery and granted licenses to drill oil to reputable,experienced drilling companies. The licensing agreement requires the company toremove the oil rig at the end of production and restore the seabed. Ninety percent ofthe eventual costs of undertaking the work relate to the removal of the oil rig andrestoration of damage caused by building it and ten percent arise through theextraction of the oil. At the Statement of Financial Position (SOFP) date (December 312025), the rig has been constructed but no oil has been extractedOn January 1st 2023, Repsola obtained the license to construct an oil rig at a cost of$500 million. Two years later the oil rig was completed. The rig is expected to beremoved in 20 years from the date of acquisition. The estimated eventual cost is 100million. The company’s cost of capital is 10% and its year end is December 31st. Repsolauses…

Maharaj Garage & Car Supplies sells a variety of automobile cleaning gadgets including a variety of hand vacuums. The business began the first quarter (January to March) of 2024 with 20 (Mash up Dirt) deep clean, cordless vacuums at a total cost of $126,800. During the quarter, the business completed the following transactions relating to the "Mash up Dirt" brand. January 8 January 31 February 4 February 10 February 28 March 4 March 10 March 31 March 31 105 vacuums were purchased at a cost of $6,022 each. In addition, the business paid a freight charge of $518 cash on each vacuum to have the inventory shipped from the point of purchase to their warehouse. The sales for January were 85 vacuums which yielded total sales revenue of $768,400. (25 of these units were sold on account to Mandys Cleaning Supplies, a longstanding customer) A new batch of 65 vacuums was purchased at a total cost of $449,800 8 of the vacuums purchased on February 4 were returned to the supplier, as they were…

Tutor give me ans