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3 years ago

Calhoun Crockery sold merchandise; the total proceeds collected, including a 7% sales tax, amounted to $74,900.

Business

1 answer:

Gala2k [10]3 years ago

4 0

Answer:

Option (b) is correct.

Explanation:

Sale value of the merchandise = $74,900

Sales tax liability = $74,900 × (7% ÷ 107%)

= $4,900

Sale value prior to sales tax = $74,900 - $4,900

= $70,000

Sales tax @7% on $70,000 = $4,900

Hope the above calculation will clear the concept since the question clearly mention that

Calhoun Crockery sold merchandise; the total proceeds collected, including a 7% sales tax, amounted to $74,900.

This $74,900 includes 7% tax also it means that the collected proceed is 100% + 7% = 107%

which includes 7% tax liability.

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As per given data

Cost Retail

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Retail Cost

Beginning inventory $515,000 $370,000

Net purchases <u>$75,000</u> <u> $54,045</u> ( $75,000 x 72.06% )

Ending Inventory <u>$590,000</u> <u>$424,045</u>

Closing Inventory = Opening + Purchases - Closing = $370,000 + ( 890,000 + 54,000 ) - 424,045 = $889,955

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the ending balance of the retained earnings account appears in group of answer choices only the statement of stockholders’ equit

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