chapter 5 sales tax

8/11/2019 Chapter 5 Sales Tax

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Ali Sattars Sales Tax +971-55-1582821

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1.Sales tax is:A)A direct tax levied on sales of goods and servicesB)An indirect tax levied on the sales of goods and servicesC)Administered by the TreasuryD)Charged by businesses on taxable supplies

2.Sales tax is due on all sales. Is this statement correct?A)YesB)No

3 .When sales tax is not recoverable on the cost of a motor car, it should be treated in which ofthe followingways?A)Deducted from the cost of the asset capitalisedB)Included in the cost of the asset capitalisedC) Deducted from output tax for the period

D) Written off to I/S as an expense

4.Purchases of goods costing $500 subject to sales tax at 15% occur. Which of the followingcorrectly records the credit purchase?A)Debit Purchases $500.00

Debit Sales tax $75.00Credit Payables $575.00

B) Debit Purchases $575.00Credit Payables $575.00

C)Debit Purchases $436.78Debit Sales tax $65.22

Credit Payables $500.00

D)Debit Purchases $500.00Credit Sales tax $65.22Credit Payables $434.78

5. When a cash purchase of $115.00 is made (including sales tax at 15%) the entries are:A)Debit Purchases 115.00

Credit Cash 115.00

B)Debit Purchases 100.00Debit Sales tax 15.00

Credit Cash 115.00

C)Debit Cash 100.00Debit Sales tax 15.00

Credit Purchases 115.00


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B) $1,880C) $2,000D)

$2,350

11.If sales (including VAT) amounted to $27,612.50, and purchases (excluding VAT) amounted

$18,000, the balance on the VAT account assuming all items are subject to VAT at 17.5% wouldbe:

A) $962.50 debitB)

$962.50 creditC) $1,682.10 debitD) $1,682.10 credit

12.A business offers interset ordering and payment facilities. A customer purchases goods for$200 plus sales tax at 17.5% by credit card. How would this transaction be posted to the accountsof the buyer?

A)

Dr bank $200; Dr Sales tax $35; Cr Purchases $235B) Dr Purchases $200; Dr sales tax $35; Cr account payable $235C)

Dr Purchases $200; Dr sales tax $35; Cr credit card account $235D)

Dr account payable $235; Cr credit card account $235

13.Who normally suffers the cost of sales tax ?A)The first supplier in the chain of supplyB)The manufacturerC)The retailerD)The consumer

14.Output tax is ?

A) VAT on purchases

B) VAT on salesC) Payments to HM Revenue & CustomsD)

Repayments to HM Revenue and customs

15.Salman gives his customers individual trade discounts from the list price and a general 5%cash discount for all invoices settled with in 7 days of issue. A new customer, Ali negotiates a25% trade discount. His transactions during June are:June12 Buys goods with a $5,000 list priceJune 15 Returns goods with a $1,000 list price as faultyJune 16 Pays half of the net balance on his accountHow much does Ali owe to Salman at the end of June?

A) $1,425B)

$1,500C)

$2,000D) $2,850


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16.During a month a business made sales of 24,600 and purchases of 15,200 exclusive of VAT. The

business is registered for VAT and both sales and purchases are subject to VAT at 17.5%. What is

the balance on the VAT account at the end of the month?

A) A debit balance of 1,645

B) A credit balance of 1,645

C)

A debit balance of 11,045

D) A credit balance of 11,045

17. If an invoice states that the settlement terms are net 30 days, this indicates that:

A) The invoice amount, net of VAT, is payable 30 days from receipt of the goods

B)

The invoice amount, net of VAT, is payable 30 days from the invoice date

C) The invoice amount, gross of VAT, is payable 30 days from receipt of the goods

D)

The invoice amount, gross of VAT, is payable 30 days from the invoice date

18.Avalon gives his customers individual trade discounts from the list price and a general 5%

cash discount for all invoices settled with in 7 days of issue. A new customer, Nolava

negotiates a 25% trade discount. His transaction during June are:June 12 Buys goods with a 5,000 list price

June 15 Return goods with a 1,000 list price as faulty

June 16 Pays half of the net balance on his account

How much does Nolava owe Avalon at the end of June?

A) 1,425

B)

1,500

C)

2,000

D) 2,850

19.

A summary of the transactions of Ramsgate, who is registered for VAT at 17.5%,shows thefollowing for the month of August 20X9.

Outputs 60,000 (exclusive of VAT)

Inputs 40,286 (inclusive of VAT)

At the beginning of the period Ramsgate owed 3,400 to HM revenue and customs, and during

the period he has paid 2,600 to them.

At the end of the period the amount owing to HM revenue and customs is :

A) 3,700

B)

3,930

C)

4,400D) 5,300

20.The sales account is:

A) Credit with the total of sales made, including VAT

B) Credit with the total of sales made, excluding VAT

C)

Debit with the total of sales made, including VAT

D) Debit with the total of sales made, excluding VAT


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21.

A business sold goods that had a net value of 600 to Lucid plc. What entries are required

to record this transaction if VAT is payable at 17.5%?

A) Dr Lucid plc 600, Dr VAT 105, Cr Sales 705

B) Dr Lucid plc 705, Cr VAT 105, Cr Sales 600

C) Dr Lucid plc 600, Cr VAT 105, Cr Sales 600

D) Dr Sales 600, Dr VAT 105, Cr Lucid plc 705

22.During the first quarter of 19X9, a business had taxable outputs, net of VAT, of $42,780 and taxable

inputs, net of VAT of $30,360. All are subject to VAT at standard rate. At the end of the quarter,

how much VAT is payable or recoverable from Customs and Exchange?

A) $2,174 payable

B) $2,174 recoverable

C) $1,850 payable

D) $1,850 recoverable

23.Reality Limited is a manufacturing company, buys material s costing $5,200, machinery costing

$5,200, machinery costing $3,416 and office equipment costing $1,340. It is also sells goods for$5,200. These transactions are all inclusive of sales tax at 17.5%.

What is the total input sales tax, which the business has paid?

A) $967.84

B) $1,742.30

C) $708.34

D) $1,482.8

24.A company recieves a settlement discount of $35 from a supplier. The amount is debited to the

discount received account. As a result, gross profit is:

A) Understated by $35

B)

Understated by $70C) Overstated by $70

D) Uneffective

25.Fake Ltd offers its credit customers a settlement discount of 5% for payment with in 10 days of the

invoice date. It is prepairing an invoice for a credit customer who has just purchased goods for

$1,000 excluding sales tax. Sales tax is at 17.5%. what will be the amount shown on the invoice sent

to the customer?

A) $1,000

B) $1,116.25

C)

$1,166.25D) $1,175

chapter 5 sales tax

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