Question

A shoe dealer purchased net Birr 8,000 worth of shoes from a shoe company.A Find the amount it is to pay the company including VAT.BIf the dealer sold the shoes for Birr 12,000, find the amount of VAT liable tothe dealer.​

Answer 1

Answer:

A) Total amount to be paid = Birr 8,560

B) Amount of VAT liable to the dealer = Birr 520

Step-by-step explanation:

The tax on bought commodity and the tax on sold commodity isn't provided but in some places, these values are 7% and 9% respectively. So, these are the values that will be used for this question.

Note that these values vary from country to country and the value missing from this question will not change how the question is solved; the question will still be solved in a similar manner, only the parameters will vary.

A) The dealer bought Birr 8000 at 7% tax.

Total amount to be paid = cost price (1 + r%)

r = 7% = 0.07

Total amount to be paid = 8000 × 1.07 = Birr 8,560

B) To find the VAT, it is the difference between the tax paid when the good was bought and the tax put on it after it was sold.

Tax paid when the shoes were bought = 7% of cost price = 7% × 8,000 = Birr 560

Tax paid when the shoes were sold = 9% of selling price = 9% × 12,000 = Birr 1,080

VAT = tax recovered on sale - Tax paid on purchase

VAT = 1080 - 560 = Birr 520

Hope this Helps!!!