Which of the Following Represents the Impact of a Taxable

question 93

Multiple Choice

Which of the following represents the impact of a taxable cash sale of $400 on the accounting equation if the sales tax rate is 5%?

• A) An increase to cash for $420, an increase to sales tax expense for $20, and an increase to sales revenue for $400.
• B) An increase to cash for $400, an increase to sales tax payable for $20, and an increase to sales revenue for $380.
• C) An increase to cash for $420, an increase to sales tax payable for $20, and an increase to sales revenue for $400.
• D) None of these answer choices is correct.

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Definitions:

Product Costs

Costs that are considered to be directly associated with the production of goods or services, including direct materials, direct labor, and manufacturing overhead.

Fixed Production Costs

Costs that do not vary with the level of production, such as rent for manufacturing facilities.

Variable Selling Expenses

Costs that fluctuate with sales volume, such as commissions and shipping charges, directly associated with the selling of products.

Fixed Production Costs

Costs that do not change with the level of production output, such as rent, salaries, and equipment depreciation.