Question

Excise Taxes

Essex Power provides electricity to a wide area of western Ontario. During October 2018 it billed 23,400 of its residential customers located in the town of Heyworth a total of $2,590,000 for electricity (this is considered revenue). In addition Essex is required to collect the following taxes:

Ontario Provincial Excise Tax: A tax of $3.00 per customer plus 2% of billing used to fund the Ontario Energy Commission

Federal Excise Tax: A tax of $0.50 per customer plus 0.1% of billing used to fund the Federal Energy Commission

Required:

If required, round your answers to the nearest cent.

1. Determine how much Essex will bill these customers in total for the month of October 2018.
$

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1. Customers are typically charged for sales and excise taxes. These taxes are collected by the seller, but are owed to the taxing authority.

See Cornerstone 8-2.

Learning Objective 2.

2. Prepare the entry to record the billing of these amounts. For those boxes in which no entry is required, leave the box blank.

	Accounts Receivable
	Sales Revenue
	Excise Taxes Payable (Provincial)
	Excise Taxes Payable (Federal)
	(Record sale)

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2. Sales and excise taxes collected from the customer are owed to the taxing authority.

Learning Objective 2.

3. Prepare the entry to record the collection of these amounts.

	Cash
	Accounts Receivable
	(Record collection of receivables)

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4. Prepare the entry to record the payment of the state excise taxes to the appropriate governmental unit. For those boxes in which no entry is required, leave the box blank.

	Excise Taxes Payable (Provincial)
	Excise Taxes Payable (Federal)
	Cash
	(Record payment)

Answer 1

Answer to 1

Billing to customers by Essex in October 2018:

Particulars	Calculation	Amount ($)	Remarks
Revenue		2590000	Already given in question
Provisional excise tax	3 X No. of customers =3 X 23400	70200	3$ per customer
	2% X 2590000	51800	2% of billing
Federal excise tax	0.5 X No. of customers =0.5 X 23400	11700	0.5$ per customer
	=0.1% X 2590000	2590	0.1% of billing
TOTAL		2726290

Billing to customers: $ 2726290

Answer to 2

Dr. Account receivable	2726290
Cr. Sales Revenue	2590000
Cr. Excise taxes payable (Provincial)	122000 (70200+51800)
Cr. Excise taxes payable (Federal)	14290 (11700+2590)

Answer to 3

Dr. Cash	2726290
Cr. Account receivable	2726290

Answer to 4

Dr. Excise taxes payable (Provincial)	122000 (70200+51800)
Dr. Excise taxes payable (Federal)	14290 (11700+2590)
Cr. Cash	136290