...Kimberly Culcay April 16, 2015 Case 14-07 eVade Pays Up Required: 1. As of December 31, 2011, what amount, if any, of sales taxes due should be recognized in eVade’s financial statements? a. The journal entry that should made is: December 31, 2011(record estimates as) Retained Earnings 48,000 Sales Tax Expense 12,000 Estimated Tax Liabilities 60,000 -The recommendation that should be made is to charge 60 million to the estimated tax liabilities; 48,000 to retained earnings and 12,000 to sales tax expense. The 48,000 that is made to the retained earnings is because it must be adjusted retrospectively. In order to be adjusted retrospesctively the 60,000 is divided by the five years and since four years have passed then the adjustment would be made to retained earnings for 48,000. 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? b. Since the confirmation of the program was not made until June 15, 2012, then in March 31, 2012 the company does not record anything because it is a contingency the settlement has not happened yet. On March 31, 2012 there is an agreement that a settlement will happen but an agreement is not enough evidence to record anything, then the settlement will only be recorded when it actually happened. 3. What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2012? c...
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...Case 14-07 eVade Pays Up Synopsys eVade, an online retailer, operates distributions centers in many states including State X. eVade does not collect or remit sales taxes to State X. As a December 31, 2011 eVade has operated in state X for five years. In recent court ruling, States X states that the company would be subject to collect sales taxes. Although the company considers the risk of detection to not be probable, eVade estimated the total amount of sales tax payables for the past five years to be $50 millions plus $6 million in interest and $ 4 million in penalties. On March 15, 2012, State X established a tax amnesty program. Any unregistered taxpayer who voluntarily registers to collect tax will be forgiven 50 percent of all unpaid sales tax and all interest and penalties. eVade decides to take advantage of this program. Issue 1 As of December 31, 2011 What amount, if any, of sales taxes due should recognized in eVade ‘s financial statements? Scope In order to analyze what part of the sections sections of the FASB Accounting Standards Codification applies to the case, ASC 450 section was examined since non-income taxes are often accounted for under the contingencies guidance. Next, ASC 740 section was also studied. ASC 740-10-20 defines “income taxes as domestic and foreign federal (national), state, and local (including franchise) taxes based on income.” Since sales taxes are under the umbrella of local and state, the following step will be defining if eVade...
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...ACTG 493, Accounting Cases, Research and Analysis Group Case 1 Memorandum To: Professor Siyi Li From: Group 4 Date: July 5, 2016 Subject: eVade Pays Up (Deloitte Trueblood Case 14-07) I. Case Description and Key Facts eVade is an online retailer that fulfills its orders by shipping its products directly to customers across all 50 states in the U.S. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states, including State X. eVade does not collect or remit sales tax to State X. This practice is consistent with eVade’s practice in all 50 States. In recent court rulings, State X has taken the position that operating a distribution center within the state constitutes nexus and thus would subject any company operating a distribution center to collect and remit sales tax on all sales made within the state. As of December 31, 2011, eVade has operated a distribution center within State X for the past five years. Although the company considers the risk of detection to not be probable, eVade estimates total sales tax payable to State X to be $50 million. In addition, eVade estimates that $6 million in interest and $4 million in penalties are also payable to the state. On March 15, 2012, a tax amnesty program was established by the Governor of State X. The program provides that an unregistered taxpayer who voluntarily registers to collect sales tax prospectively will be forgiven...
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