Question

State of Denial has enacted a 6% sales tax, and City of Angels has enacted a 1% sales tax. Businesses that collect sales taxes must transfer all collections to State within 30 days after the end of the month. State must transfer collected taxes to local governments within 90 days after the end of the month. City and State account for sales taxes in the general fund, and each has a December 31 fiscal year end. Sales subject to sales taxes in City were $5,000,000 in December and $3,000,000 in January. At year-end, City State
Revenues Payable Revenues Payable
50,000 350,000 0 50,000
80,000 480,000 480,000 80,000
50,000 300,000 350,000 0
$0 $350,000 $300,000 $50,000

Answer 1

Answer:

$350,000

Explanation:

Denial has state in form of revenue from sales. The taxation on sales is non exchange of transaction. It results in derived tax revenue as Income tax and Sales tax. Assets are recognized at earlier of exchange of transaction or receipt of resources. The current liabilities are paid in 30 days.

Total Tax revenue = $350,000

[$5,000,000 * (6% enacted state sales tax + 1% local sales tax.)]