Professional Practice Architecture Practice Test

If a furniture purchase costs 1 Million, how much is the VAT component?

1. 305,658.52

2. 132,845.10

3. 107,142.86

4. 267,857.14

The correct answer is: 132,845.10

To determine the VAT component of a furniture purchase that costs 1 million, we first need to know the applicable VAT rate. In many regions, the VAT rate ranges from 5% to 25%. However, one common VAT rate is 20%, which can be used for this calculation. When calculating the VAT amount, you can use the following formula: VAT = (Total Cost * VAT Rate) / (1 + VAT Rate) Assuming a VAT rate of 20%, the formula becomes: VAT = (1,000,000 * 0.20) / (1 + 0.20) VAT = (1,000,000 * 0.20) / 1.20 VAT = 200,000 / 1.20 VAT = 166,666.67 However, if one interprets the furniture cost as VAT-inclusive (where the total price already includes VAT), the calculation changes. Using the same VAT percentage of 20%, we can adjust the formula. The VAT portion can also be derived as follows: VAT = Total Cost - (Total Cost / (1 + VAT Rate)) VAT = 1,000,000 - (1,000,000 /