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The agreed cost of an item to be purchased by a business on credit is $4,000. The applicable cost will be debited to advertising expense. The item is subject to 5% goods and services tax (GST) and 7% provincial sales tax (PST). When this transaction is recorded, what amount will be debited to advertising expense?

Respuesta :

Answer:

$4,480

Explanation:

The total amount to be recorded as expense would include the cost of the item purchased an the values of the applicable taxes.

As such, the advertising expense would include the value of the goods and services tax as well as the provincial sales tax with both tax rates applied to the applicable cost.

Goods and services tax = 5% × $4,000

= $200

Provincial sales tax = 7% × $4,000

= $280

Total debit to advertising expense

= $4,000 + $200 + $280

= $4,480

The amount that will be debited to advertising expense is $4,480.

  • The calculation is as follows:

= (5 + 7)% of $4,000 + $4,000

= 12% of $4,000 + $4,000

= $480 + $4,000

= $4,480

Therefore we can conclude that The amount that will be debited to advertising expense is $4,480.

Learn more: brainly.com/question/17429689

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