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?

$_______

To determine the total sales tax paid to regulatory authorities during the month of March 20X3, we need to follow these steps:

### 1. **Calculate the Sales Tax on Sales**
The sales amount provided is inclusive of sales tax. Therefore, to find the sales tax included in the sales amount:

\[
\text{Sales Tax on Sales} = \frac{\text{Sales (including tax)} \times \text{Sales Tax Rate}}{1 + \text{Sales Tax Rate}}
\]

Substituting the values:

\[
\text{Sales Tax on Sales} = \frac{109,250 \times 15\%}{1 + 15\%} = \frac{109,250 \times 0.15}{1.15} = \frac{16,387.5}{1.15} = 14,250
\]

### 2. **Determine the Sales Tax on Purchases**
Sales tax is only calculated on the purchases, not including sales tax. The sales tax on purchases is:

\[
\text{Sales Tax on Purchases} = \text{Purchases} \times \text{Sales Tax Rate}
\]

\[
\text{Sales Tax on Purchases} = 64,000 \times 15\% = 64,000 \times 0.15 = 9,600
\]

### 3. **Analyze the Sales Tax Account**
The sales tax account at the beginning of the month had a credit balance of $4,540, meaning the company owed this amount to the authorities. The account at the end of the month had a debit balance of $2,720, meaning the company had overpaid or had a refundable amount.

The total sales tax payable during the month is calculated as:

\[
\text{Total Sales Tax Payable} = \text{Opening Balance} + \text{Sales Tax on Sales} - \text{Sales Tax on Purchases}
\]

\[
\text{Total Sales Tax Payable} = 4,540 + 14,250 - 9,600 = 9,190
\]

### 4. **Determine the Sales Tax Paid to Authorities**
Given that the closing balance is a debit balance of $2,720, it implies that the amount paid to the authorities resulted in this balance. Therefore, the total sales tax paid during the month would be:

\[
\text{Sales Tax Paid} = \text{Total Sales Tax Payable} + \text{Closing Debit Balance}
\]

\[
\text{Sales Tax Paid} = 9,190 + 2,720 = 11,910
\]

Thus, the total sales tax paid to regulatory authorities during March 20X3 is **$11,910**.

Would you like more details or have any questions? 

Here are some related questions:
1. How is sales tax calculated differently for purchases and sales?
2. Why does a sales tax account sometimes have a debit or credit balance?
3. How do you account for overpaid sales tax in the next accounting period?
4. What happens if the sales tax is not paid to the authorities on time?
5. How do businesses manage sales tax compliance effectively?

**Tip:** Always double-check the calculation of tax-inclusive amounts by isolating the tax from the total to avoid overestimating or underestimating tax liabilities.

Learn how to calculate Eva Co's sales tax for March 20X3. Includes step-by-step solutions and explanations for determining total sales tax paid to regulatory authorities based on sales, purchases, and account balances.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation