Test Bank Answers Appendix B Sales Taxes Mutiple Choice

APpendix B: sales taxes

TRUE-FALSE STATEMENTS

1. GST is a provincial tax on most goods and services.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

2. GST is 5% on most transactions.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

3. GST is not charged on basic grocery items.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

4. HST is a combined or harmonized tax consisting of GST and provincial sales tax.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

5. HST does not have the same regulations as GST.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

6. Provincial sales taxes are remitted to the Receiver General for Canada.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

7. HST is remitted to the Receiver General for Canada.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

8. Provincial sales taxes are remitted to the Minister of Finance of the province.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

9. The PST percentage does not vary from province to province.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

10. GST returns are submitted quarterly for most registrants.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

11. Zero-rated supplies include uncooked pizzas.

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

12. GST charged on a sale is recorded in the GST Payable account.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on good and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

13. When inventory is purchased for resale, its GST is recorded as GST payable.

Difficulty: Easy

Learning Objective: Record sales taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

14. PST is not charged on goods for resale.

Difficulty: Easy

Learning Objective: Record sales taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

15. Furniture purchased for the office would include an entry for GST recoverable.

Difficulty: Easy

Learning Objective: Record sales taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

16. When office supplies are purchased, the amount of HST paid would be recorded in the HST Recoverable account.

Difficulty: Easy

Learning Objective: Record sales taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

17. When purchasing equipment, the amount of taxes paid (PST/GST) is included in the amount recorded in the Furniture account.

Difficulty: Easy

Learning Objective: Record sales taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

18. When remitting GST, it is appropriate to net the GST Payable and GST Recoverable accounts.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

19. If Company A has not received payment from a customer purchasing on account, the tax is not due to the government until that payment is received.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

20. At the end of the reporting period for GST, the amount of GST payable is added to any amount of GST recoverable.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

MULTIPLE CHOICE QUESTIONS

21. The goods and services tax is payable to the

a) Minister of Finance.

b) Canada Revenue Agency.

c) Receiver General for Canada.

d) Bank of Canada.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

22. Provinces that have harmonized sales tax include all of the following except

a) Ontario.

b) Nova Scotia.

c) Manitoba.

d) Newfoundland.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

23. If HK Coats located in Alberta ships a large load of adult jackets to a Manitoba customer, it must charge

a) just Manitoba PST.

b) just GST.

c) both GST and Alberta PST.

d) both GST and Manitoba PST.

Difficulty: Medium

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

24. Which province(s) apply both PST and GST to the selling price of a taxable good or service?

a) British Columbia

b) Manitoba

c) Saskatchewan

d) all of the above

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

25. GST applies at a rate of ___ on most transactions.

a) 7%

b) 5%

c) 8%

d) 6%

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

26. Zero-rated supplies include all of the following except

a) prescription drugs.

b) six or more doughnuts.

c) ready-to-eat pizza.

d) uncooked pizza.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

27. Taxable supplies include

a) uncooked pizza.

b) two doughnuts.

c) dental services.

d) prescription drugs.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

28. PST is remitted to the

a) Minister of Finance of the province.

b) Canada Revenue Agency.

c) Bank of Canada.

d) Receiver General for Canada.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

29. HST is remitted to the

a) Minister of Finance.

b) Canada Revenue Agency.

c) Bank of Canada.

d) Receiver General for Canada.

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

30. Goods exempt from PST include

a) children’s clothing.

b) residential rent.

c) textbooks.

d) all of the above

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

31. Which provinces and territories only charge GST?

a) Northwest Territories

b) Nunavut

c) Yukon

d) all of the above

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

32. HST is charged by which province?

a) Ontario

b) Alberta

c) British Columbia

d) Saskatchewan

Difficulty: Easy

Learning Objective: Explain the different types of sales tax.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

33. Sales taxes collected represent a ___ for the company charging it.

a) revenue source

b) cash source

c) asset

d) liability

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

34. Lawn-care services of $ 350 were provided by Quickcare Inc., located in Manitoba, for cash. The entry to record this sale would include a credit to

a) Accounts Receivable.

b) HST Payable.

c) Cash.

d) GST Payable.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

35. Lawn-care services of $ 350 were provided by Quickcare Inc., located in New Brunswick, for cash. HST is 15%. The entry to record this sale would include a credit to

a) Service Revenue.

b) HST Payable.

c) Cash.

d) both a and b

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

36. Sales taxes invoiced is a

a) long-lived asset.

b) current asset.

c) current liability.

d) equity item.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

37. Hair-care services of $ 50 were provided by Maine Event, located in Manitoba, for cash. Manitoba has both PST 8% and GST 5%. The entry to record this sale would include a credit to

a) Service Revenue for $ 50.00.

b) Service Revenue for $ 56.50.

c) GST Payable for $ 4.00.

d) PST Payable for $ 2.50.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

38. Terry’s Trucks sells $ 250 worth of oil to a home-based mechanic. Both businesses are located in Manitoba where the PST is 8% and GST 5%. Terry’s uses a perpetual inventory system and the cost of the oil sold was $ 125 before tax. What would be the entry to cost of goods sold for the sale?

a) $ 135.00

b) $ 141.25

c) $ 250.00

d) $ 125.00

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

39. When the goods from a sale with HST are returned, the HST account debited is

a) HST Expense.

b) HST Payable.

c) HST Recoverable.

d) No entry regarding HST is needed.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

40. The Maine Event receives $ 100 worth of merchandise back from one of its customers. As part of its entry for the return of product, which GST-related account would be debited?

a) GST Expense

b) GST Payable

c) GST Recoverable

d) No entry regarding GST is needed.

Difficulty: Easy

Learning Objective: Record sales taxes collected by businesses on goods and services.

Section Reference: Sales Taxes Collected on Receipts

CPA: Financial Reporting

AACSB: Analytic

41. When merchandise is purchased ___ is included in the inventory cost.

a) GST

b) PST

c) HST

d) no sales tax

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

42. GST paid on merchandise for resale is debited to

a) GST Recoverable.

b) GST Payable.

c) Merchandise Inventory.

d) Cash.

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

43. A return of merchandise to the supplier was made for $ 100 plus taxes. The GST related to the return would appear as a

a) $ 5 debit to GST Recoverable.

b) $ 5 credit to GST Recoverable.

c) $ 5 credit to GST Payable.

d) $ 5 debit to GST Payable.

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

44. A phone bill that totals $ 113 is received in Manitoba, a province that has both GST and PST. The amount that would appear as the expense would be

a) $ 113.

b) $ 100.

c) $ 108.

d) $ 105.

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

45. Company 21 purchases $ 5,000 worth of new furniture (plus 5% GST and 7% PST). The amount debited to the Furniture account would be

a) $ 5,600.

b) $ 5,350.

c) $ 5,000.

d) $ 5,250.

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

46. Bright Bulb Solutions purchases $ 5,000 worth of new furniture (plus HST of 13%). The amount related to the HST account would be

a) a debit of $ 650 to HST Payable.

b) a debit of $ 650 to HST Recoverable.

c) zero as the amount would appear in the Furniture balance.

d) a credit of $ 650 to HST Recoverable.

Difficulty: Easy

Learning Objective: Record sale taxes paid on the purchase of goods and services.

Section Reference: Sales Taxes Paid on Payments

CPA: Financial Reporting

AACSB: Analytic

47. At the end of the quarter, Company 21 had a balance of $ 14,000 in their GST Recoverable account and $ 22,000 in GST Payable. The entry to record the quarterly remittance would be

a) Dr. GST Payable $ 22,000, Cr. GST Recoverable $ 14,000, Cr. Cash $ 8,000.

b) Dr. GST Recoverable $ 14,000, Dr. Cash $ 8,000, Cr. GST Payable $ 22,000.

c) Dr. GST Payable $ 8,000, Cr. Cash $ 8,000.

d) Dr. GST Recoverable $ 8,000, Cr. Cash $ 8,000.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

48. At the end of the quarter, Company 21 had a balance of $ 20,000 in their HST Recoverable account and $ 24,000 in HST Payable. The entry to record the quarterly remittance would be

a) Dr. HST Recoverable $ 20,000, Dr. Cash $ 4,000, Cr. HST Payable $ 24,000.

b) Dr. HST Payable $ 24,000 Cr. HST Recoverable $ 20,000, Cr. Cash $ 4,000.

c) Dr. HST Payable $ 4,000, Cr. Cash $ 4,000.

d) Dr. HST Recoverable $ 4,000, Cr. Cash $ 4,000.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

49. At the end of the quarter, Company 21 had invoiced total PST of $ 5,500. The entry to record the quarterly remittance would require the following entry plus a cheque made out to ___.

a) Dr. PST Payable, the Minister of Finance

b) Dr. PST Recoverable, the Minister of Finance

c) Dr. PST Payable, the Receiver General for Canada

d) Dr. PST Recoverable, the Receiver General for Canada

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

50. If a company has a GST Recoverable amount of $ 5,600 and a GST Payable amount of $ 5,000 at the end of the quarter, what should they do?

a) Delay filing their quarterly return until the next quarter when additional GST payable amounts are expected to offset the recoverable amount.

b) File the quarterly return and request a refund of $ 600.

c) Pay the amount of GST payable of $ 5,000.

d) Pay the amount of GST payable of $ 5,000 and request a refund of $ 5,600.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

51. Bobs Bites has an HST Recoverable amount of $ 15,000 and an HST Payable amount of $ 10,000 at the end of the quarter. What should they do?

a) Pay the amount of HST payable of $ 10,000 and request a refund of $ 15,000.

b) File the quarterly return and request a refund of $ 5,000.

c) Pay the amount of HST payable of $ 10,000.

d) Delay filing their quarterly return until the next quarter when additional HST payable amounts are expected to offset the recoverable amount.

Difficulty: Easy

Learning Objective: Record the remittance of sales taxes.

Section Reference: Remittance of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

MATCHING QUESTION

52. For each province below, indicate using an X which sales tax or taxes they charge:

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

53. For the items below, indicate with an X their correct GST/HST tax category:

Difficulty: Easy

Learning Objective: Explain the different types of sales taxes.

Section Reference: Types of Sales Taxes

CPA: Financial Reporting

AACSB: Analytic

Legal Notice

Copyright © 2019 by John Wiley & Sons Canada, Ltd. or related companies. All rights reserved.

The data contained in these files are protected by copyright. This manual is furnished under licence and may be used only in accordance with the terms of such licence.

The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made available on a network, used to create derivative works, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of John Wiley & Sons Canada, Ltd.