There Is a Difference Between Who Is Legally Required to Send

question 42

Multiple Choice

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

• A)whether the tax is imposed by the federal government or a state government
• B)whether the tax is based on the ability-to-pay principle or the benefits-received principle
• C)the elasticity of demand for the item that is taxed
• D)The motive for the tax. If the tax is designed to raise revenue, more of the burden will fall on firms. If the tax is designed to achieve a social objective (for example, to discourage smoking)more of the burden will fall on consumers.

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Definitions:

Sales On Account

Transactions where goods or services are sold to a customer with an agreement that payment will be made at a later date.

Cost Of Goods Sold

The total cost directly associated with the production of the goods sold by a company.

Times Interest Earned

A ratio that measures a company's ability to meet its interest obligations, calculated by dividing earnings before interest and taxes (EBIT) by the interest expense.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity.