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Excise Taxes
Reagan Gas provides gas utilities to a wide area of eastern Illinois. During May 2019 it billed 36,000 of its residential customers located in the town of Moline a total of $3,295,000 for electricity (this is considered revenue). In addition Reagan is required to collect the following tax:
a. State excise tax: A tax of $5.00 per customer plus 3% of billing used to fund the Illinois Energy Commission
b. Federal excise tax: A tax of $0.45 per customer plus 0.2% of billing used to fund the Federal Energy Commission
Required:
1. Determine how much Reagan will bill these customers in total for the month of May 2019.
2. Prepare the entry to record the billing of these amounts.
3. Prepare the entry to record the collection of these amounts.
4. Prepare the entry to record the payment of the state excise taxes to the appropriate governmental unit.
(a)
Introduction:
The companies collect taxes from customers on sale of goods or rendering services. They record collected taxes as liabilities until they pay off to the tax authorities.
To calculate:
Total bill for the May, 2019.
No. of customers = 36,000
Billing amount = $3,295,000
Sales Excise Tax = $5 per customer + 3% of the billing amount
Sales Excise Tax =
Sales Excise Tax = $180,000 + $98,850
Sales Excise Tax = $278,850
Federal Excise Tax = $0.45 per customer + 0.2% of the billing amount
Federal Excise Tax =
(b)
Introduction:
The companies collect taxes from customers on sale of goods or rendering services. They record collected taxes as liabilities until they pay off to the tax authorities.
To record:
Journal entry for billing the customers.
(c)
Introduction:
The companies collect taxes from customers on sale of goods or rendering services. They record collected taxes as liabilities until they pay off to the tax authorities.
To record:
Journal entry for receiving payment from the customers.
(d)
Introduction:
The companies collect taxes from customers on sale of goods or rendering services. They record collected taxes as liabilities until they pay off to the tax authorities.
To record:
Journal entry to record payment to tax authorities.
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