What amounts should be recognized in the financial statement

Assignment Help Accounting Basics
Reference no: EM131746842

eVade, an online retailer, fulfills its online orders by shipping its products directly to customers in all 50 states. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states across the country, including State X. Consistent with its practice in all 50 states, eVade does not collect or remit sales tax to State X.

In recent court rulings, State X has taken the position that operating a distribution center within a state constitutes nexus and thus would subject that company to collect and remit sales tax on all sales within that state.

As of December 31, 2011, eVade has operated its distribution center in State X for five years and has never collected or remitted sales tax to State X. Although the Company considers the risk of detection to not be probable, eVade has estimated the total amount of sales tax payable to the state for the past five years to be $50 million plus $6 million in interest and $4 million in penalties.

On March 15, 2012, Mr. Needmoney, the governor of State X, established a tax amnesty program. The program provides that any unregistered taxpayer who voluntarily registers to collect sales tax on a prospective basis will be forgiven (1) 50 percent of all unpaid sales tax and (2) all interest and penalties on unpaid taxes. eVade management decides to take advantage of this program.

On June 15, 2012, eVade completes the necessary paperwork and other actions to participate in the program and pays State X $25 million to settle its obligation through December 31, 2011.

Required:

1. As of December 31, 2011, what amount, if any, of sales taxes due should be recognized in eVade's financial statements?

2. What effect, if any, does eVade's decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2012?

3. What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2012?

Reference no: EM131746842

Questions Cloud

Compilation of the most common types of spam : Spam. Email spam is the curse of the Internet. Here is a compilation of the most common types of spam:
Evaluation of essential operational decisions : Evaluation of essential operational decisions/strategies/principles exercised in "The Goal"
Outline of the commercial lending home study problem : Outline of the Commercial Lending Home Study Problem. Background of the Borrower: assume no one knows your customer, give them all information
What factors shape an organizations external competitiveness : What factors shape an organizations external competitiveness? Who should be involved in evaluating an employees needs assessment?
What amounts should be recognized in the financial statement : What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2012
Determine the greatest security challenge : Determine the greatest security challenge that a network administrator might encounter when troubleshooting issues in secured networks.
Describe the additional audit procedures : You are the auditor of Fine Timber Limited (Fine Timber) a major furniture manufacturer in Malaysia. Fine Timber intends to upgrade its manufacturing processes.
Facebook users by country : Facebook users by country. The following table gives the numbers of Facebook users by region of the world as of December 31, 2011:
Complete porter analysis to industry analysis : Complete a Porter’s Analysis to Industry Analysis on an Improved Business Industry (Internet industry) using the six forces.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd