Excise Taxes Essex Power provides electricity to a wide area

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.

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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.

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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.

Solution

Answer to 1

Billing to customers by Essex in October 2018:

3 X No. of customers

=3 X 23400

0.5 X No. of customers

=0.5 X 23400

TOTAL

Billing to customers: $ 2726290

Answer to 2

Answer to 3

Answer to 4