Question

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $262,500, what is the amount of the sales taxes owed to the taxing agency?

A. $12,500
B. $12,600
C. $262,500
D. $12,000

Answer 1

To calculate the sales taxes owed, the total amount including the sales price plus 5% sales tax is divided by 1.05 to find the sales price before tax and then multiplied by 0.05 to find the amount of sales tax, resulting in $12,500.

The correct option is A.

Step-by-step explanation:

To find the amount of sales taxes owed, we need to determine the portion of the $262,500 that represents the sales tax. The total amount includes both the sales price and the 5% sales tax. We can let S represent the sales price before tax. The equation to represent the total amount collected including sales tax is:

S + 0.05S = $262,500

This simplifies to:

1.05S = $262,500

To find the sales price before tax, we divide the total amount by 1.05:

S = $262,500 / 1.05

S = $250,000

Now, we calculate the amount of sales tax by multiplying the sales price before tax by the tax rate:

Amount of sales tax = $250,000 × 0.05

Amount of sales tax = $12,500

Therefore, the amount of the sales taxes owed to the taxing agency is $12,500, which makes option A correct.

The correct option is A.