ExpertMedium2 marksShort Answer
ACCA · Question 15 · Recording Transactions: Sales and Purchases
Section A
A retailer sells goods for $1,440, which includes sales tax at a rate of 20%. The retailer also purchased goods for resale for $800 exclusive of sales tax.
What is the net amount payable to the tax authorities? (Enter the number only)
Section A
A retailer sells goods for $1,440, which includes sales tax at a rate of 20%. The retailer also purchased goods for resale for $800 exclusive of sales tax.
What is the net amount payable to the tax authorities? (Enter the number only)
How to approach this question
Calculate output tax (tax on sales) and input tax (tax on purchases). Net payable = Output tax - Input tax. Remember, $1,440 is tax-inclusive (120%), while $800 is tax-exclusive (100%).
Full Answer
Output tax (on sales): $1,440 is 120%. Tax = $1,440 × (20/120) = $240.
Input tax (on purchases): $800 is 100%. Tax = $800 × 20% = $160.
Net payable to tax authorities = Output tax - Input tax = $240 - $160 = $80.
Common mistakes
Calculating output tax as 20% of $1,440 ($288), forgetting it is a tax-inclusive figure.
Practice the full ACCA FA — Financial Accounting Practice Exam 5
65 questions · hints · full answers · grading
More questions from this exam
Q01Section A
Quantum Innovations, a rapidly growing tech startup, is preparing its first set of for...EasyQ02Section A
MetroWater, a public utility company, is finalizing its annual report. The chief accou...MediumQ03Section A
GlobalHealth NGO receives a restricted cash grant of $50,000 specifically designated f...MediumQ04Section A
CircuitWorks manufactures specialized electronic components. At year-end, they have 1,...MediumQ05Section A
CodeCrafters Ltd is developing a new proprietary software platform. During the year, t...Easy