Question

Bavarian Bar and Grill opened for business in November 2018. During its first two months of operation, the restaurant sold gift certificates in various amounts totaling $9,200, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the industry indicates that 80% of gift certificates are redeemed within one year. Certificates totaling $3,300 were presented for redemption during 2018 for meals having a total price of $3,700. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift certificates) are purchased. Sales taxes will be remitted in January. What would be the noncurrent sales tax liability?

Answer 1

The amount that is classified as current Iiability at a December
Particulars	Amount $
Gift certificates sold	9,200
Redeemed %	80%
Estimated current liability	7,360
Less: gift certificates redeemed	3,300
Current Iiability at December 31,2018	4,060
Non Current liability at December 31,2018=($9,200-3,300)-$4060
=$1,840