Question

The City of San Francisco assesses a 15-cent telecommunications tax per call on calls initiated and terminated within the jurisdiction. During 2017, there were approximately 978,000,000 calls upon which the tax should be imposed. In addition, the city also collects sales taxes for the 3 counties that are part of incorporated San Francisco. Those taxes collected are $12,000,000 for County A, $7,500,000 for County B, and $4,130,000 for County C. Assume the amount of both taxes assessed were collected in their entirety. Fees for the collection services are 2% of tax collected. Residual cash after the fees assessed was disbursed to the counties.

Prepare the journal entries to reflect the transactions on the City of San Francisco’s books.

Prepare the journal entries to reflect the transactions on each recipient county’s books.

Answer 1

JOURNAL ENTREIS IN CITY OF SAN FRANCISCO BOOKS:

1. Bank Account debit $146,700,000

To Taxes received (Income) $146,700,000

(15 cents on 978000000)

2. Bank account debit 23,630,000

To Sales Tax Income collected County A $12,000,000

To Sales Tax Income collected County B $ 7,500,000

To Sales Tax Income collected County C $ 4,130,000

(Being sales tax collected from counties)

3. Fees Expenses account debit $34,06,600

To Bank account $ 34,06,600

(2% on 146,700,000+23,630,000=34,06,600)

=============================================================================================

BOOKS OF COUNTY A

1. BANK ACCOUNT DEBIT 12,000,000

TO SALES TAX INCOME COLLECTED 12,000,000

(bEING SALES TAX COLLECTED )

2. Fees expenses account debit 240,000

to bank account    240,000

(being 2% charged)

3. SHARE OF CALL INCOME FROM CITY OF SAN FRANSCISCO AFTER FEES

BANK ACCOUNT DEBIT 73,008,548

TO CALLS INCOME ACCOUNT (SHARE ) 73,008,548

(

14,67,00,000
0.02
2934000
14,37,66,000.00
23.63		12
73008548.46		7.5
		4.13
		23.63

=============================================================================================

BOOKS OF COUNTY B :

1. BANK ACCOUNT DEBIT 7,500,000

TO SALES TAX INCOME COLLECTED 7,500,000

(bEING SALES TAX COLLECTED )

2. Fees expenses account debit 150,000

to bank account    150,000

(being 2% FEES PAID) )

3. SHARE OF CALL INCOME FROM CITY OF SAN FRANSCISCO AFTER FEES

BANK ACCOUNT DEBIT 45630342

TO CALLS INCOME ACCOUNT (SHARE ) 45630342

14,37,66,000.00
23.63		12
45630342.78		7.5
		4.13
		23.63

==============================================================================================

BOOKS OF COUNTY C

1. BANK ACCOUNT DEBIT 4,130,000

TO SALES TAX INCOME COLLECTED 4,130,000

(bEING SALES TAX COLLECTED )

2. Fees expenses account debit 82,600

to bank account    82,600

(bEING 2% FEES PAID)

3. SHARE OF CALL INCOME FROM CITY OF SAN FRANSCISCO AFTER FEES

BANK ACCOUNT DEBIT 25,127,108

TO CALLS INCOME ACCOUNT (SHARE ) 25,127,108

14,37,66,000.00
23.63		12
25127108.76		7.5
		4.13
		23.63

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