A company that is VAT-registered has sales for the period of $245,000 (excluding VAT) and purchases for the period of $123,375 (including VAT). The opening balance on the VAT account was $18,000 credit. The VAT rate is 17.5%.
What will be the closing balance on the VAT account at the end of the period?
A . $6,500 debit
B . $42,500 credit
C . $375 debit
D . $36,375 credit
Answer: B