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 1998 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 government-wide financial statement as sales tax revenue for the fiscal year ended 12/31/00.

Question

Quizplus · Accepted Answer

The sales tax collected in the year ending 12/31/00 would include sales from January to November 2000. The sales tax collected for these months is $200. Since the period for "available" is the same as property taxes, the City should also recognize the $55 collected on 1/20/01 applicable to December 2000 sales as revenue for the fiscal year ended 12/31/00. Therefore, the total sales tax revenue recognized for the fiscal year ended 12/31/00 is $200 + $55 = $255. However, since the City levies a 2% sales tax, the revenue recognized should be divided by 0.02 to get the total sales, which is $255/0.02 = $12,750. Therefore, the amount recognized in the government-wide financial statement as sales tax revenue for the fiscal year ended 12/31/00 is $12,750, which is closest to option C) $270.

A City Levies a 2% Sales Tax