A City levies a 2% sales tax.Sales tax must be remitted by the merchants to the City by the 20^th day of the month following the month in which the sale occurred.Cash received by the City related to sales tax is as follows: Amount received 1/20/00, applicable to December 1999 sales $ 50
Amount received 2/20/00, applicable to January 2000 sales $ 15
Amount received during 2000 related to February-November 2000 sales $200
Amount received 1/20/01 for December 2000 sales $ 55
Amount received 2/20/01 for January 2001 $ 20
Assuming the City uses the same period to define "available" as the maximum period allowable for property taxes, what amount should it recognize in the fund financial statement as sales tax revenue for the fiscal year ended 12/31/00.

Question

Quizplus · Accepted Answer

The City should only recognize sales tax revenue for sales that have occurred within the fiscal year. Therefore, the sales tax revenue for the fiscal year ended 12/31/00 should only include sales from January to November 2000, which is $200. Adding the sales tax revenue received for December 1999 and December 2000, which were received in January 2000 and January 2001 respectively, the total amount is $305. However, since the City uses the same period to define "available" as the maximum period allowable for property taxes, which is 60 days after the end of the fiscal year, the amount that can be recognized as revenue for the fiscal year ended 12/31/00 is $270 ($200 for Feb-Nov 2000 sales + $55 for December 2000 sales received on 1/20/01 + $15 for January 2000 sales received on 2/20/00).

A City Levies a 2% Sales Tax