Correct Option: B. $12,000
Detailed Explanation:
To determine the total amount payable by the customer, including VAT (Value Added Tax), we need to follow these steps:
-
Understand the Sale Amount: The company sells goods worth $10,000. This amount is the net sale price before VAT is added.
-
Identify the VAT Rate: The VAT rate given is 20%. This means that for every dollar of the sale price, an additional 20% will be added as tax.
-
Calculate the VAT Amount:
- To find the VAT amount, we can use the formula:
[
\text{VAT Amount} = \text{Sale Amount} \times \text{VAT Rate}
]
-
Plugging in the numbers:
[
\text{VAT Amount} = 10,000 \times 0.20 = 2,000
]
-
Calculate the Total Amount Payable:
- The total amount payable by the customer is the sum of the sale amount and the VAT amount:
[
\text{Total Amount Payable} = \text{Sale Amount} + \text{VAT Amount}
]
- Substituting the values we have:
[
\text{Total Amount Payable} = 10,000 + 2,000 = 12,000
]
Thus, the total amount payable by the customer, including VAT, is
$12,000.
Explanation of Other Options:
-
Option A: $10,000: This option represents only the sale amount without VAT. It does not account for the additional VAT charge, which is incorrect.
-
Option C: $8,000: This option is incorrect as it suggests a reduction in the sale price, which does not apply in this scenario. There is no basis for calculating a total of $8,000 when the sale price is $10,000 plus VAT.
-
Option D: $14,000: This option incorrectly adds too much to the sale price. It seems to imply an incorrect VAT calculation or an additional charge that does not exist in this context.
Common Pitfalls:
- Forgetting to Add VAT: A common mistake is to only consider the sale price and forget to add the VAT, leading to an underestimation of the total amount payable.
- Miscalculating the VAT: Ensure that the VAT is calculated as a percentage of the sale price, not as a flat amount or incorrectly applied to the total.
- Confusing VAT with Other Taxes: VAT is a specific type of tax, and it’s important to distinguish it from other potential charges that may apply in different contexts.
Revision Summary:
- The total amount payable includes both the sale price and the VAT.
- VAT is calculated as a percentage of the sale price.
- Always add the VAT to the original sale price to find the total amount due.
- Be cautious of common mistakes such as forgetting to include VAT or miscalculating the VAT amount.