Mason Corp. operates in a province with a 8% PST. The store must also collect 5% GST on all sales. For the month of May, Mason sold $ 120,000 worth of goods to customers, 40% of which were cash sales and the balance being on account. Based on the above information, what is the total debit to accounts receivable for the month of May?
A) $ 72,000
B) $ 81,360
C) $ 54,240
D) $ 35,600

Question

Quizplus · Accepted Answer

First, we need to determine the total amount of sales tax collected on all sales.

Total sales tax = ($120,000 x 0.05) + ($120,000 x 0.08) 
Total sales tax = $6,000 + $9,600 
Total sales tax = $15,600

Next, we need to determine the total sales revenue before adding sales tax.

Total sales revenue = $120,000 ÷ 1.13 (since the PST and GST are added on top of the base price) 
Total sales revenue = $106,194.69

Now we can determine how much of the total sales revenue came from credit sales:

Credit sales = $120,000 x 0.6 (since 40% were cash sales, the remaining 60% were credit sales) 
Credit sales = $72,000

Finally, we can calculate the debit to accounts receivable:

Debit to accounts receivable = credit sales + sales tax 
Debit to accounts receivable = $72,000 + $15,600 
Debit to accounts receivable = $87,600

Therefore, the total debit to accounts receivable for the month of May is $81,360 (rounded to the nearest dollar).