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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Yossarian Power Corporation provides electricity to a wide area of eastern Maine. During March 2020, it billed 3,000 of its residential customers located in the town of Maryville a total of $393,000 for electricity. In addition Yossarian Power is required to collect the following taxes:

a. State excise tax: A tax of $3.50 per customer plus 2% of billing used to fund the Maine Energy Commission

b. Federal excise tax: A tax of $0.50 per customer plus 0.15% of billing used to fund the Federal Energy Commission

Required:

1. Determine how much Yossarian Power will bill these 3,000 customers in total for the month of March 2020.

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.

To determine

(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 March, 2020.

Explanation

No. of customers = 3,000

Billing amount = $393,000

Sales Excise Tax = $3.50 per customer + 2% of the billing amount

Sales Excise Tax = ($3,000×$3.50)+(2%×$393,000)

Sales Excise Tax = $10,500 + $7,860

Sales Excise Tax = $18,360

Federal Excise Tax = $0.50 per customer + 0.15% of the billing amount

Federal Excise Tax = ($3,000×$0

To determine

(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.

To determine

(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.

To determine

(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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