Multiple choice

An article is marked at Rs. 500. The wholesaler sells it to a retailer at 20% discount and charges sales-tax on the remaining price at 12.5%. The retailer, in turn, sells the article to a customer at its marked price and charges sales-tax at the same rate. Calculate: (i) the price paid by the customer (ii) the amount of VAT paid by the retailer.

  1. (i) Rs. 662.50            (ii) Rs. 11.50

  2. (i) Rs. 562.50            (ii) Rs. 12.50

  3. (i) Rs. 472.50            (ii) Rs. 13.50

  4. (i) Rs. 410.50            (ii) Rs. 14.50
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Wholesaler to retailer: Price = 500 * 0.8 = 400. Tax = 400 * 0.125 = 50. Total = 450. Retailer to customer: Price = 500. Tax = 500 * 0.125 = 62.5. Total = 562.50. VAT = Output tax - Input tax = 62.5 - 50 = 12.50.

AI explanation

The retailer buys the article from the wholesaler for 500 - (0.20 * 500) = 400 rupees. The customer pays the retailer the full marked price of 500 plus a 12.5 percent sales tax, which calculates to 500 + (0.125 * 500) = 562.5 rupees. The retailer's VAT liability is the tax collected from the customer minus the tax already paid to the wholesaler, which is (0.125 * 500) - (0.125 * 400) = 62.5 - 50 = 12.5 rupees. The price paid by the customer is Rs. 562.50 and the amount of VAT paid by the retailer is Rs. 12.50.

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