Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Case 14-07eVade Pays UpeVade an online retailer fulfills its online orders by shipping its...

Case 14-07eVade Pays UpeVade an online retailer fulfills its online orders by shipping its products directly tocustomers in all 50 states eVade does not have a brick-and-mortar store presence

Case 14-07eVade Pays UpeVade, an online retailer, fulfills its online orders by shipping its products directly tocustomers in all 50 states. eVade does not have a brick-and-mortar store presence in anystate, but does operate distribution centers in various states across the country, includingState X. Consistent with its practice in all 50 states, eVade does not collect or remit salestax to State X.In recent court rulings, State X has taken the position that operating a distribution centerwithin a state constitutes nexus and thus would subject that company to collect and remitsales tax on all sales within that state.As of December 31, 2011, eVade has operated its distribution center in State X for fiveyears and has never collected or remitted sales tax to State X. Although the Companyconsiders the risk of detection to not be probable, eVade has estimated the total amountof sales tax payable to the state for the past five years to be $50 million plus $6 million ininterest and $4 million in penalties.On March 15, 2012, Mr. Needmoney, the governor of State X, established a tax amnestyprogram. The program provides that any unregistered taxpayer who voluntarily registersto collect sales tax on a prospective basis will be forgiven (1) 50 percent of all unpaidsales tax and (2) all interest and penalties on unpaid taxes. eVade management decides totake advantage of this program.On June 15, 2012, eVade completes the necessary paperwork and other actions toparticipate in the program and pays State X $25 million to settle its obligation throughDecember 31, 2011.Required:1. As of December 31, 2011, what amount, if any, of sales taxes due should berecognized in eVade’s financial statements?2. What effect, if any, does eVade’s decision to participate in the tax amnestyprogram have on the amount recognized as of March 31, 2012?3. What amounts should be recognized in the financial statements for the $25million payment on June 15, 2012?1. 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?

Jul 27 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions