Question

Lovett Ltd. operates in Alberta (a province that does not have PST or HST) and sells only fully taxable and GST exempt supplies. Lovett Ltd. reports the following amounts (net of any GST collected or paid) in its financial records for the current year: • Sales $2,550,000 ($1,500,000 of sales was fully taxable supplies, the remaining was GST exempt supplies) • Cost of Goods Sold $1,100,000 (purchases of merchandise exceeded Cost of Goods Sold by $70,000, all merchandise purchased and sold was fully taxable supplies) Depreciation expense $ 250,000 • Salaries and wages $ 310,000 • Capital expenditures $ 200,000 (purchase of furniture & fixtures used 60% for fully taxable supplies and 40% for GST exempt supplies) Which of the following is the correct amount of GST payable (or refund) for Lovett Ltd. in the current year? A. $59,000 GST payable B. $10,500 GST payable C. $6,500 GST payable D. $34,500 GST payable

Answer 1

Answer Pagenol Taxable zego rated Total 1,500,000 1,050,000 2,550,000 Sales GST payable on Sales Sl. 07. GST payable 75000 6 75000 Input tax Credits O 1,140,000 5./. 58,500 Purchabel 1,170,000 GST Rate 5%. 58, 500 Input tax credit Capital Expenditure 120,000 GST Rate 5% Input tax Credit 6ooo 80,000 200000 5. yooo 100 00 58 500+ 10,000 =68, Soo Total input tax Coredit GST payable/ (refund) 75000- 68,500 =6,500

Purchake Pagina Cost of Goods sold + inventoon $1,100,000 + $ 70,000 = $ 1,170,000 GST rate in Alberta iş 57. there is not HST(PST zero grated supplies are taxable supplies with rate of tax at 6%. These are not exempt supplies, The tax rate is zero they are eligible fo input tax Credits option "C" is Correct Anşwear $6,506 GST Payable.