Acca financial Accounting (FA) Study Text ac ca (FA)

Illustration 3 – Calculation of sales tax 

 

Orlando sells the following goods: 

1 

to Bruno at a tax inclusive price of $470. 

2 

to Cosmo at a tax exclusive price of $700. 

How much sales tax is Orlando collecting on behalf of the tax 

authority if the rate of sales tax is 17.5%? 

 

 

Solution to Illustration 3 

 

Sales tax can be calculated using the relevant percentage depending on 

whether the price is tax inclusive or exclusive. 

Sales to Bruno (sales price tax inclusive) (17.5%/117.5%) × $470 = $70 

Sales to Cosmo (sales price tax exclusive) (17.5%/100%) × $700 = 

$122.50 

Total sales tax collected: $70 + $122.50 = $192.50 

 

 

 

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