Question

Bridge Corp. operates in Alberta (a province that does not have PST or HST) and sells only fully taxable and zero-rated supplies. Bridge Corp. reports the following amounts (net of any GST collected or paid) in its financial records for the current year: • Sales $1,250,000 ($1,005,000 of sales was fully taxable supplies, the remaining was zero-rated) • Cost of Goods Sold $ 810,000 (purchases of merchandise exceeded Cost of Goods Sold by $120,000, all merchandise purchased and sold was fully taxable supplies) • Depreciation expense $ 150,000 • Salaries and wages $ 270,000 • Capital expenditures $ 100,000 (purchase of furniture & fixtures used 70% for fully taxable supplies and 30% for zero-rated supplies) Which of the following is the correct amount of GST payable (or refund) for Bridge Corp. in the current year? O A. $11,000 GST payable OB. $4,000 GST refund OC. $1,250 GST refund OD. $3,750 GST payable

Answer 1

	Taxable	Zero-rates	Total
Sales	1005000	245000	1250000
GST payable on Sales	5%	0%
GST payable	50250	0	50250
Input tax credits
Purchases	930000	0	930000
GST rate	5%	5%
Input tax credit	46500		46500
Capital expenditure	70000	30000	100000
GST Rate	5%	5%
Input tax credit	3500	1500	5000
Total input tax credit			51500
GST payable/(refund)			-1250

Purchase	=cost of goods sold+inventory
	=810000+120000
	930000

GST rate in Alberta is 5%, there is not HST/PST

Zero rated supplies are taxable supplies with rate of tax at 0%. These are not exempt supplies. Meaning though the tax rate is zero they are eligible for input tax credits

Hence, option c 1250 GST refund