Sales Tax Case Study

1370 Words 6 Pages
Register to read the introduction… 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?

SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS

Statement Period How much should eVade Pays Up record sales tax in State X for particular time period?
December 31, 2011 • Recognized $25 million
• As liability under Sales Tax Payable
March 15, 2012 • Carried over of $25 million from statement of 12/31/2011
• Plus the amount of accrued Sales Tax Payable from
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June 15, 2012 • A decrease in Cash and the Sales Tax Liability accounts by $25 million
• Increase the Sales Tax Liability account by the amount accrued from 4/1/12-6/15/12

AUTHORITATIVE AND INTREPRETIVE GUIDANCE CONSIDERED
Refer to ASC 250-10-5-4 (Error Corrections)
Refer to ASC 250-10-45-23 (Discovery of an error in the financial statements of a prior period)
Refer to ASC 250-10-45-24 (Reporting the error items as error corrections in single period statements)
Refer to ASC 250-10-45-25 (Corrections Related to Prior Interim Periods of the Current Fiscal Year)
Refer to ASC 250-10-50-7 (Correction of an Error in Previously Issued Financial Statements)
Refer to ASC 250-10-50-8 (Disclosing the annual report for the adjustments year)
Refer to ASC 250-10-50-9 (Indicating the effects of restatement on the balance of retained earnings)
Refer to ASC 250-10-50-11 (Error Corrections Related to Prior Interim Periods of the Current Fiscal Year)
Refer to ASC 606-10-55-49 Superseded ASC 605-45-50-03
Refer to ASC 740-10-35-2 (New Information Affecting Measurement of TAX Positions
Refer to ASC 250-10-20 (Glossary)
DETAILED DISCUSSION, ANALYSIS, EVALUATION OF ALTERNATIVES & REASONS FOR CONCLUSION
QUESTION
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When financial statements for more than one period are presented, which is ordinarily the preferable procedure, the disclosure shall include the effects for each of the periods included in the statements. Such disclosures shall include the amounts of income tax applicable to the prior period adjustments. Disclosure of restatements in annual reports issued after the first such post-revision disclosure would ordinarily not be

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