Question

A city "Piggy-backs" its 3 percent sales tax on top of the state sales tax. during calendar year 2019 the state remits $800,000 to the city for sales collected for the city . on January 25,2020,the state sends the city $ 300,000 for sales taxes collected in the fourth quarter of 2019. on march 1, the state sends the city $ 45,000 for the sales taxes applicable to 2019,but sent in by late filers .Historically, the state has sent the city about $ 30,000 every June for sales taxes applicable to previous years that either trickles in from additional late filers or that results from tax audits. the city has a stated policy of treating sales taxes as " available " if received by March 30 of the year after the applicable sales tax year . based on the foregoing information only , how much should the city recognize as sales tax revenue in its financial statement for the year ended December 31,2019?

Answer 1

The city should recognize $1,145,000 as sales tax revenue for the year ended December 31, 2019, which includes amounts received by March 30, 2020, following the city's stated policy on sales tax revenue recognition.

Step-by-step explanation:

To determine how much the city should recognize as sales tax revenue in its financial statement for the year ended December 31, 2019, we must consider the city's revenue recognition policy which considers sales taxes "available" if received by March 30 of the year following the sales tax year. The total amount remitted to the city by the state for 2019 sales tax consists of the following:

• $800,000 sent during calendar year 2019,
• $300,000 sent on January 25, 2020, for the fourth quarter of 2019,
• $45,000 sent on March 1, 2020, for late filers' 2019 taxes.

However, since the $30,000 from additional late filers or tax audits historically received every June after the March deadline is not considered "available" based on the city's policy, it is not included. Adding the amounts that meet the availability criterion together ($800,000 + $300,000 + $45,000), the city should recognize a total of $1,145,000 as sales tax revenue for the year ended December 31, 2019.