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Perfume Depot sells two different tiers of perfume products to customers. They charge $30 for tier 1 perfume and $100 for tier 2 perfume. The sales tax rate is 4.5%. During the month of October, Perfume Depot sells 75 tier 1 perfumes, and 60 tier 2 perfumes. A. What is the total tax charged to the customer per tier 1 perfume? What is the overall charge per tier 1 category perfume? B. What is the total tax charged to the customer per tier 2 perfume? What is the overall charge per tier 2 category perfume? C. How much sales tax liability does Perfume Depot have for the month of October? D. What accounts are used to recognize this tax situation for the month of October? E. When Perfume Depot remits payment to the sales tax governing body, what happens to the sales tax liability?

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Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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Chapter
Section
FindFindarrow_forward

Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 12, Problem 2PB
Textbook Problem
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Perfume Depot sells two different tiers of perfume products to customers. They charge $30 for tier 1 perfume and $100 for tier 2 perfume. The sales tax rate is 4.5%. During the month of October, Perfume Depot sells 75 tier 1 perfumes, and 60 tier 2 perfumes.

A. What is the total tax charged to the customer per tier 1 perfume? What is the overall charge per tier 1 category perfume?

B. What is the total tax charged to the customer per tier 2 perfume? What is the overall charge per tier 2 category perfume?

C. How much sales tax liability does Perfume Depot have for the month of October?

D. What accounts are used to recognize this tax situation for the month of October?

E. When Perfume Depot remits payment to the sales tax governing body, what happens to the sales tax liability?

To determine

(a)

Introduction:

A current liability is a debt or obligation due during the operating period of the company. A company has normally one year of the operating period.

A non-current liability is a long-term obligation having a due date in the subsequent periods.

To identify:

The total tax charged to the customer per tier 1 perfume and an overall charge per tier 1 perfume.

Explanation of Solution

Computation of the total tax charged to the customer per tier 1 perfume and an overall charge per tier 1 perfume:

Total Tax=($30×75)×4.5%=$101

To determine

(b)

To identify:

The total tax charged to customer per tier 2 perfume and overall charge per tier 2 perfume.

To determine

(c)

To compute:

The total sales tax liability for the month of October.

To determine

(d)

To identify:

The accounts used to recognize the above transactions.

To determine

(e)

To identify:

The sales tax liability after remittance of sales tax to the governing body.

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Chapter 12 Solutions

Principles of Accounting Volume 1
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