eTrade Pays Up eTrade, an online retailer, fulfills its onlineorders by shipping its products...

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eTrade Pays Up eTrade, an online retailer, fulfills its onlineorders by shipping its products directly to customers in all 50states. eTrade does not have a brick-and-mortar store presence inany state, but does operate distribution centers in various statesacross the country, including State X. Consistent with its practicein all 50 states, eTrade does not collect or remit sales tax toState X. In recent court rulings, State X has taken the positionthat operating a distribution center within a state constitutesnexus and thus would subject that company to collect and remitsales tax on all sales within that state. As of December 31, 2017,eTrade has operated its distribution center in State X for fiveyears and has never collected or remitted sales tax to State X.Although the Company considers the risk of detection to not beprobable, eTrade has estimated the total amount of sales taxpayable to the state for the past five years to be $50 million plus$6 million in interest and $4 million in penalties. On March 15,2018, Mr. Needcash, the governor of State X, established a taxamnesty program. The program provides that any unregisteredtaxpayer who voluntarily registers to collect sales tax on aprospective basis will be forgiven (1) 50 percent of all unpaidsales tax and (2) all interest and penalties on unpaid taxes.eTrade management decides to take advantage of this program. OnJune 15, 2018, eTrade completes the necessary paperwork and otheractions to participate in the program and pays State X $25 millionto settle its obligation through December 31, 2017.
As of December 31, 2017, what amount, if any, of sales taxes dueshould be recognized in eTrade’s financial statements? Circle theBest Answer.
a. eTrade should neither recognize any sales tax payable nordisclose the amount as a reasonably possibly contingent liabilityas of December 31, 2017.
b. eTrade should not recognize any sales tax payable, but shoulddisclose the amount as a reasonably possibly contingent liabilityas of December 31, 2017.
c. eTrade should recognize the amount of estimated sales taxpayable of $50 million as of December 31, 2017.
d. eTrade should recognize the entire amount of estimated salestax payable including penalties and interest, $60 million, as ofDecember 31, 2017.
2. What effect, if any, does eTrade’s decision to participate inthe tax amnesty program have on the amount recognized as of March31, 2018? Circle the Best Answer.
a. There is no outstanding liability.
b. The outstanding liability should be reduced to $25 million,the amount that eTrade will ultimately settle its obligationfor.
c. The outstanding liability should not be adjusted and remainsat $50 million.
d. The outstanding liability should not be adjusted and remainsat $60 million.
3. What amounts should be recognized in the financial statementsfor the $25 million payment on June 15, 2018? Answer the questionin the following journal entry format

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1 As of December 31 2017 what amount if any of sales taxes due should be recognized in eTrades financial statements Circle the Best Answer d eTrade should recognize the entire amount of See Answer

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In: AccountingeTrade Pays Up eTrade, an online retailer, fulfills its onlineorders by shipping its products directly...eTrade Pays Up eTrade, an online retailer, fulfills its onlineorders by shipping its products directly to customers in all 50states. eTrade does not have a brick-and-mortar store presence inany state, but does operate distribution centers in various statesacross the country, including State X. Consistent with its practicein all 50 states, eTrade does not collect or remit sales tax toState X. In recent court rulings, State X has taken the positionthat operating a distribution center within a state constitutesnexus and thus would subject that company to collect and remitsales tax on all sales within that state. As of December 31, 2017,eTrade has operated its distribution center in State X for fiveyears and has never collected or remitted sales tax to State X.Although the Company considers the risk of detection to not beprobable, eTrade has estimated the total amount of sales taxpayable to the state for the past five years to be $50 million plus$6 million in interest and $4 million in penalties. On March 15,2018, Mr. Needcash, the governor of State X, established a taxamnesty program. The program provides that any unregisteredtaxpayer who voluntarily registers to collect sales tax on aprospective basis will be forgiven (1) 50 percent of all unpaidsales tax and (2) all interest and penalties on unpaid taxes.eTrade management decides to take advantage of this program. OnJune 15, 2018, eTrade completes the necessary paperwork and otheractions to participate in the program and pays State X $25 millionto settle its obligation through December 31, 2017.As of December 31, 2017, what amount, if any, of sales taxes dueshould be recognized in eTrade’s financial statements? Circle theBest Answer.a. eTrade should neither recognize any sales tax payable nordisclose the amount as a reasonably possibly contingent liabilityas of December 31, 2017.b. eTrade should not recognize any sales tax payable, but shoulddisclose the amount as a reasonably possibly contingent liabilityas of December 31, 2017.c. eTrade should recognize the amount of estimated sales taxpayable of $50 million as of December 31, 2017.d. eTrade should recognize the entire amount of estimated salestax payable including penalties and interest, $60 million, as ofDecember 31, 2017.2. What effect, if any, does eTrade’s decision to participate inthe tax amnesty program have on the amount recognized as of March31, 2018? Circle the Best Answer.a. There is no outstanding liability.b. The outstanding liability should be reduced to $25 million,the amount that eTrade will ultimately settle its obligationfor.c. The outstanding liability should not be adjusted and remainsat $50 million.d. The outstanding liability should not be adjusted and remainsat $60 million.3. What amounts should be recognized in the financial statementsfor the $25 million payment on June 15, 2018? Answer the questionin the following journal entry format