Sales Tax (Y7C4)

1

	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?
	A	The company has some exports that were not liable to sales tax.
	B	The company made some sales of zero-rated products.
	C	The company made some sales of exempt products.
	D	The company sold some products to businesses not registered for sales tax.
2	The following information relates to Eva Co’s sales tax for the month of March 20x3.
	Sales (including sales tax) Purchases (net of sales tax)		$ 109,250 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?
	A	$6,470.00
	B	$11,910.00
	C	$14,047.50
	D	$13,162.17
3	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?
	A	Dr Purchases $500, Dr Sales tax $75, Cr Payables $575
	B	Dr Purchases $575, Cr Sales tax $75, Cr Payables $500
	C	Dr Purchases $500, Cr Payables $500
	D	Dr Purchases $575, Cr Payables $575
4	Information relating to Lauren Co’s transactions for the month of May 20x4 is shown below:
	Sales (including sales tax) Purchases (net of sales tax)		$ 140,000* 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 tax paid to regulatory authorities at the end of May 20x4 (to the nearest $)?
	A	$7,000
	B	$20,000
	C	$23,333
	D	$13,000
5	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?
	A	Assets $1,800 less Liabilities $200 equals Capital $1,600
	B	Assets $2,200 less Liabilities $1,000 equals Capital $1,200
	C	Assets $2,600 less Liabilities $800 equals Capital $1,800
	D	Assets $2,600 less Liabilities $1,000 equals Capital $1,600
6	Trade receivables and payables in the financial statements of sales tax registered trader will appear as described by which of the following?
	A	Inclusive of sales tax in the statement of financial position
	B	Exclusive of sales tax in the statement of financial position
	C	The sales tax is deducted and added to the sales tax account in the statement of financial position
	D	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
7	Which of the following correctly describe the entry in the sales account for a sale for a sales tax registered trader?
	A	Credited with the total of sales made, including sales tax
	B	Credited with the total of sales made, excluding sales tax
	C	Debited with the total of sales made, including sales tax
	D	Debited with the total of sales made, excluding sales tax
8	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%
	A	$962.50 debit
	B	$962.50 credit
	C	$1,682.10 debit
	D	$1,682.10 credit