Recording sales tax expense
The University Book Store sells books and other supplies to students in a state where the sales tax rate is 7 percent. The University Book Store engaged in the following transactions for 2012. Sales tax of 7 percent is collected on all sales.
1.Book sales, not including sales tax, for 2012 amounted to $275,000 cash.
2.Cash sales of miscellaneous items in 2012 were $150,000, not including tax.
3.Cost of goods sold amounted to $210,000 for the year.
4.Paid $130,000 in operating expenses for the year.
5.Paid the sales tax collected to the state agency.
Required
a.What is the total amount of sales tax the University Book Store collected and paid for the year?
b. What is the University Book Store’s net income for the year?
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