Question

Hudson Hotel collects 15% in city sales taxes on room rentals, in addition to a $2 per room, per night, occupancy tax. Sales taxes for each month are due at the end of the following month, and occupancy taxes are due 15 days after the end of each calendar quarter. On January 3, Year 5, Hudson paid its November Year 4 sales taxes and its fourth quarter Year 4 occupancy taxes. Additional information pertaining to Hudson’s operations is Year 4 Room Rentals Room Nights October $100,000 1,100 November 110,000 1,200 December 150,000 1,800 What amounts should Hudson report as sales taxes payable and occupancy taxes payable in its December 31, Year 4, balance sheet?

Answer 1

Hudson Hotel should report $16,370 as sales taxes payable and $7,200 as occupancy taxes payable in its December 31, Year 4, balance sheet.

Step-by-step explanation:

Hudson Hotel should report $16,370 as sales taxes payable and $7,200 as occupancy taxes payable in its December 31, Year 4, balance sheet.

To calculate the sales taxes payable, we need to determine the sales taxes collected for each month and then add them up. In November Year 4, the room rentals were $110,000, so the sales taxes collected would be 15% of $110,000, which is $16,500. For December Year 4, the room rentals were $150,000, so the sales taxes collected would be 15% of $150,000, which is $22,500. Adding these two amounts together, we get $16,500 + $22,500 = $39,000. However, since we are only paying the sales taxes for November Year 4, we need to adjust this amount to account for the sales taxes for December Year 4 that we have yet to pay. The sales taxes payable would be $39,000 - $22,500 = $16,500.

For the occupancy taxes payable, we need to determine the occupancy taxes collected for the fourth quarter of Year 4. The room nights for October, November, and December were 1,100, 1,200, and 1,800 respectively. The occupancy tax for each room, per night, is $2. Therefore, the occupancy taxes collected for October, November, and December would be $2 x 1,100 = $2,200, $2 x 1,200 = $2,400, and $2 x 1,800 = $3,600 respectively. Adding these three amounts together, we get $2,200 + $2,400 + $3,600 = $8,200. However, since we are only paying the occupancy taxes for the fourth quarter of Year 4, we need to adjust this amount to account for the occupancy taxes for January Year 5 that we have yet to pay. The occupancy taxes payable would be $8,200 - $3,600 = $4,600.