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Sales Tax Question

Janice paid a total of $55.11 in sales tax after buying items costing $120, $60, and $190. Sarah's business made $1,000 in sales excluding sales tax and $2,350 in purchases including sales tax. At the end of the week, the sales tax account will show $175 payable. Idris was invoiced $1,880 for carpets including sales tax after a 20% trade discount on a list price of $2,000, with a 17.5% sales tax rate.

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1K views3 pages

Sales Tax Question

Janice paid a total of $55.11 in sales tax after buying items costing $120, $60, and $190. Sarah's business made $1,000 in sales excluding sales tax and $2,350 in purchases including sales tax. At the end of the week, the sales tax account will show $175 payable. Idris was invoiced $1,880 for carpets including sales tax after a 20% trade discount on a list price of $2,000, with a 17.5% sales tax rate.

Uploaded by

Khushi Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

OSHWAL COLLEGE

ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS


(ACCA)
Foundation Level
FA2
Maintaining financial records

Revision questions and solutions


1. Janice buys a dress costing $120, shoes costing $60 and a jacket costing $190. These are all
gross figures, inclusive of sales tax at 17·5%.
How much sales tax in total has Janice paid?
A. $55·11
B. $64·75
C. $74·48
D. $68·51
Solution
Sales tax paid
Amount paid = 120+60+190 = $370------------ 117.5%
? --------- 17.5%
Sales tax paid=$55.10

Assignment
2. Sarah runs her own business and is registered for sales tax. This week her purchases were
$2,350 inclusive of sales tax and her sales were $1,000 exclusive of sales tax.
The rate of sales tax is 17·5%. At the end of the week what will the sales tax account in her
ledger show?
A. $350 receivable
B. $350 payable
C. $175 receivable
D. $175 payable
E.
3. Idris is a sales tax registered trader. On 1 October he purchases carpets for his new
showroom at the list price of $2,000. He is given a trade discount of 20% and the sales tax
rate is 17.5%.
What sum will Idris be invoiced, inclusive of sales tax?
A. $1,980
B. $2,350
C. $1,600
D. $1,880

Invoice price = ($2,000 x 80%) = 1,600(NET PRICE) X 117.5% = $1,880


Assignment
4. A sales tax registered business sells goods $1,200 plus $210 sales tax and purchases goods
costing $200 plus sales tax $35. Assuming these are the only transactions in the sales tax
period and that input tax is fully recoverable, how much sales tax is due/payable to/from
the government?
A. Payable $175
B. Recoverable $175
C. Payable $210
D. Payable $245
5. On 1 January 20X7, a business owed $6,500 in respect of sales tax (Liability)-CR. During the
quarter ended 31 March 20X7, the business made sales of $45,000 (excluding sales tax) and
made purchases amounting to $35,250 (including sales tax). If all transactions were subject
to sales tax at the rate of 17.5%, what was the balance on the sales tax account at 31 March
20X7?
A. $9,125 debit
B. $9,125 credit-----Sales tax payable
C. $8,207 debit
D. $8,207 credit

Solution

Output sales tax = 45,000 x 17.5% = $7,875

Input sales tax = 35,250----117.5%


? -17.5%
Input sales tax = 35,250 x 17.5/117.5 =$5,250
DR Sales tax account CR
Input sales tax 5,250 Balance b/d 6,500
Output sales tax 7,875
Sales tax payable(Bal c/d)-CR 9,125
14,375 14,375

OSHWAL COLLEGE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS (ACCA) Foundation Level FA2 Maintaining financial records Revis
1. Janice buys a dress costing $120, shoes costing $60 and a jacket costing $190. These are all gross figures, inclusive of
5. On 1 January 20X7, a business owed $6,500 in respect of sales tax (Liability)-CR. During the quarter ended 31 March 20X7,

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