Bavarian Bar and Grill opened for business in November 2021. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $5,800, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the industry indicates that 70% of gift cards are redeemed within one year. Gift cards totaling $1,600 were presented for redemption during 2021 for meals having a total price of $2,000. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Sales taxes will be remitted in January.

Question

Business

Pogo

4 May, 09:59

Bavarian Bar and Grill opened for business in November 2021. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $5,800, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the industry indicates that 70% of gift cards are redeemed within one year. Gift cards totaling $1,600 were presented for redemption during 2021 for meals having a total price of $2,000. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Sales taxes will be remitted in January.

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Essence Mclaughlin · Answer 1

Answer: $80

Explanation:

Total sales of gift cards for 2 months = $5,800

redeemable within 2 years of purchase date

assumed the percentage of gift cards are redeemed within one year

= 70% of $5,800 = $4,060

Actual gift card redeemed in 2021 = $1,600

Actual sales of gift card redeemed = $2,000

Balance of gift card not redeemed = $2,000 - $1,600 = $400

sales tax rate = 4%

accessed on $2,000 * 4%

= $80

Sales tax to be remitted in January for sales in November = $80