Question

The agreed cost of an item to be purchased by a business on credit is 4000. The applicable cost will be debited to advertising expenses. The item is subject to 5% goods and services tax GST and 5% provincial sales tax PST. Nguyen it’s transaction is recorded what amount will be credited to Accounts Payable?

Answer 1

Answer:

$4,400

Explanation:

For calculation of amount that will be credited to Accounts Payable first we need to find out the GST and PST which is shown below:-

Goods and services tax GST = Goods and services percentage × Purchase cost

= 5% × $4,000

= $200

Provisional sales tax PST = Provisional sales tax percentage × Purchase cost

= 5% × $4,000

= $200

Amount that will be credited to accounts payable = Purchase cost + Goods and services tax GST + Provisional sales tax PST

= $4,000 + $200 + $200

= $4,400

Therefore for computing the amount that will be credited to accounts payable we simply added all the taxes value with the purchase cost.