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Unformatted text preview: When the company remits the taxes to the taxing agency, it decreases (debits) Sales Taxes Payable and decreases (credits) Cash. The company does not report sales taxes as an expense; it simply forwards to the government the amount paid by the customer. Thus, Cooley Grocery serves only as a collection agent for the taxing authority. Sometimes companies do not ring up sales taxes separately on the cash register. To determine the amount of sales in such cases, divide total receipts by 100% plus the sales tax percentage. For example, assume that Cooley Grocery rings up total receipts of $10,600. Because the amount received from the sale is equal to the sales price 100% plus 6% of sales, or 1.06 times the sales total, we can compute sales as follows: $10,600 1.06 = $10,000. Thus, we can find the sales tax amount of $600 by either (1) subtracting sales from total receipts ($10,600 - $10,000) or (2) multiplying sales by the sales tax rate ($10,000 6%)....
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.
- Spring '11