Question

In: Accounting

Stine Co. is a retail store operating in a state with a 6% retail sales tax.

Stine Co. is a retail store operating in a state with a 6% retail sales tax. The retailer may keep 2% of the sales tax collected. Stine Co. records the sales tax in the Sales account. The amount

recorded in the Sales account during May was $148,400. 99. The amount of sales taxes (to the nearest dollar) for May is

a. $8,726. b. $8,400. c. $8,904. d. $9,438.



The amount of sales taxes payable (to the nearest dollar) to the state for the month of

May is a. $8,551. b. $8,232. c. $8,726. d. $9,249.


Solutions

Expert Solution

as sales tax records in sales account by stine co. therefore $ 148400.99 sales is a gross sales (including sales tax).

so first of all we will have to segregate the sales tax from total sales, suppose sales = x

retail sales tax = 6%

sales + sales tax = 148400.99

X + 0.06X = 148400.99

1.06X = 148400.99

X = 148400.99/1.06

= 140000.9

Sales tax = 6% of sales

= 140000.9*6%

= $ 8400

so option (b) $ 8400 should be the correct answer.

Answer to next part-

as per question the retailer may keep 2% of the sales tax collected which means out of total sales tax collected 98% to be paid to state.

so Amount of sales tax payable to the state = Total sales tax payable - 2% of total sales tax payable

= 8400.056 - 8400.056*2%

= 8400.056 - 168.0011

= $ 8232

option (b) $8232 should be the correct answer.


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