Sales Tax& Inventory FA

W is registered for sales tax. The managing director has asked four staff in the accounts department why

the output tax for the last quarter does not equal 20% of sales (20% is the rate of tax). Which one of

the following four replies she received was NOT correct?

• The company had some exports that were not liable to sales tax.

• The company made some sales of zero-rated products.

• The company made some sales of exempt products.

• The company sold some products to businesses not registered for sales tax.

The following information relates to Eva Co's sales tax for the month of March 20X3:

Sales (including sales tax) $ 109,250

Purchases (net of sales tax) $ 64,000

Sales tax is charged at a flat rate of 15%. Eva Co's sales tax account showed an opening credit balance of $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of the month.

What was the total sales tax paid to regulatory authorities during the month of March 20X3?

• $ 14,910

• $ 11,910

• $ 12,910

• $ 13,910

Alana is not registered for sales tax purposes. She has recently received an invoice for goods for resale which cost $500 before sales tax, which is levied at 15%. The total value was therefore $575.

What is the correct entry to be made in Alana's general ledger in respect of the invoice?

• DEBIT Purchases $500, DEBIT Sales tax $75, CREDIT Payables $575

• DEBIT Purchases $575, CREDIT Sales tax $75, CREDIT Payables $500

• DEBIT Purchases $500, CREDIT Payables $500

• DEBIT Purchases $575, CREDIT Payables $575

Information relating to Lauren Co's transactions for the month of May 20X4 is shown below:

Sales (including sales tax) $ 140,000*

Purchases (net of sales tax) $ 65,000

Sales tax is charged at a flat rate of 20%. Lauren Co's sales tax account had a zero balance at the

beginning of the month and at the end of the month.

* Lauren Co's sales for the month of $140,000 included $20,000 of sales exempt from sales tax.

What was the total sales tax paid to regulatory authorities at the end of May 20X4 (to the nearest $)?

• $7,000

• $20,000

• $23,333

• $13,000

A business commenced with capital in cash of $1,000. Inventory costing $800 plus sales tax is purchased on credit, and half is sold for $1,000 plus sales tax, the customer paying in cash at once. The sales tax rate is 20%.

What would the accounting equation after these transactions show?

• Assets $1,800 less Liabilities $200 equals Capital $1,600

• Assets $2,200 less Liabilities $1,000 equals Capital $1,200

• Assets $2,600 less Liabilities $800 equals Capital $1,800

• Assets $2,600 less Liabilities $1,000 equals Capital $1,600

Trade receivables and payables in the financial statements of a sales tax registered trader will appear as described by which of the following?

• Inclusive of sales tax in the statement of financial position

• Exclusive of sales tax in the statement of financial position

• The sales tax is deducted and added to the sales tax account in the statement of financial

  position

• Sales tax does not appear in the statement of financial position because the business simply acts as a collector on behalf of the tax authorities

Which of the following correctly describe the entry in the sales account for a sale for a sales tax registered trader?

• Credited with the total of sales made, including sales tax

• Credited with the total of sales made, excluding sales tax

• Debited with the total of sales made, including sales tax

• Debited with the total of sales made, excluding sales tax

Sales (including sales tax) amounted to $27,612.50, and purchases (excluding sales tax) amounted to $18,000. What is the balance on the sales tax account, assuming all items are subject to sales tax at 17.5%?

• $962.50 DEBIT

• $962.50 CREDIT

• $1,682.10 CREDIT

• $1,682.10 CREDIT

The inventory value for the financial statements of Global Co for the year ended 30 June 20X3 was based on a inventory count on 7 July 20X3, which gave a total inventory value of $950,000.

Between 30 June and 7 July 20X3, the following transactions took place.

Purchase of goods $ 11,750

Sale of goods (mark up on cost at 15%) $ 14,950

Goods returned by Global Co to supplier $ 1,500

What figure should be included in the financial statements for inventories at 30 June 20X3?

• $952,750

• $952,740

• $952,730

• $952,720

Which of the following costs may be included when arriving at the cost of finished goods inventory for inclusion in the financial statements of a manufacturing company?

1. Carriage inwards

2 Carriage outwards

3. Depreciation of factory plant

4. Finished goods storage costs

5. Factory supervisors' wages

• 1 and 5 only

• 2, 4 and 5 only

• 1, 3 and 5 only

• 1, 2, 3 and 4 only