Question 1

Ed's Bookstore has collected $750 in sales taxes during April. If sales taxes must be remitted to the government monthly, what entry will Ed's Bookstore make to show the April remittance?

Accepted Answer

The answer of Ed's Bookstore has collected $750 in sales...

Question 2

Julie's Boutique has total receipts for the month of $39,060 including sales taxes. If the sales tax rate is 5%, what are Julie's sales for the month?

Accepted Answer

Let's call the sales for the month "x". 
The sales tax is 5% of x, which means it is 0.05x. 
The total receipts including sales taxes is $39,060, so we can set up the equation: 
x + 0.05x = $39,060 
Simplifying: 
1.05x = $39,060 
Dividing both sides by 1.05: 
x = $37,200 
Therefore, the sales for the month are $37,200, which is answer B.

Question 3

A company receives $435, of which $35 is for sales tax. The journal entry to record the sale would include

Accepted Answer

The company receives $435 in cash, so the journal entry would include a debit to Cash for the total amount received.

Question 4

Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 60,000 subscriptions in January at $18 each. What entry is made in January to record the sale of the subscriptions?

Accepted Answer

The answer of Pickett Company typically sells subscriptions on an...

Question 5

Any balance in an unearned revenue account is reported as a(n)

Accepted Answer

Unearned revenue represents money received by a company in advance for goods or services that have not yet been delivered or performed. As a result, it is considered a current liability until the obligations are fulfilled, and the revenue can be recognized as earned.

Question 6

Oakley Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $71,500. If the sales tax rate is 4%, what amount must be remitted to the taxing authority for February's sales taxes?

Accepted Answer

The answer of Oakley Company does not ring up sales...

Question 7

Sales taxes collected by a retailer are reported as

Accepted Answer

Sales taxes collected by a retailer are reported as current liabilities because they are owed to the government and are expected to be paid within the next operating cycle or year.

Question 8

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to ¥420,000,000 what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

The sales revenue includes both the sales price and the sales tax. To find the sales tax, divide the total amount by 1.05 to find the sales price, then subtract this from the total. ¥420,000,000 / 1.05 = ¥400,000,000 (sales price). The sales tax is ¥420,000,000 - ¥400,000,000 = ¥20,000,000.

Question 9

Valerie's Salon has total receipts for the month of $24,645 including sales taxes. If the sales tax rate is 6%, what are Valerie's sales for the month?

Accepted Answer

The answer of Valerie's Salon has total receipts for the...

Question 10

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to ¥336,000,000, what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

The answer of A retail store credited the Sales Revenue...

Question 11

On January 1, 2014, Donahue Company, a calendar-year company, issued $600,000 of notes payable, of which $150,000 is due on January 1 for each of the next four years. The proper statement of financial position presentation on December 31, 2014, is

Accepted Answer

The portion of the notes payable that is due within one year (January 1, 2015) should be classified as current liabilities ($150,000). The remaining $450,000 is due after one year and should be classified as non-current liabilities. Therefore, the proper statement of financial position presentation on December 31, 2014, is Current Liabilities, $150,000; Non-current Liabilities, $450,000.

Question 12

The current ratio is

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. This ratio is used to measure a company's ability to pay its short-term obligations with its short-term assets.

Question 13

Each of the following is correct regarding bonds except they are

Accepted Answer

Bonds are typically sold in small denominations that are affordable for individual investors, as well as in large denominations for institutional investors. Therefore, statement D is incorrect.

Question 14

A cash register tape shows cash sales of €3,500 and sales taxes of €210. The journal entry to record this information is

Accepted Answer

The answer of A cash register tape shows cash sales...

Question 15

Hilton Company issued a four-year interest-bearing note payable for $500,000 on January 1, 2013. Each January the company is required to pay $125,000 on the note. How will this note be reported on the December 31, 2014 statement of financial position?

Accepted Answer

The note is a long-term debt because it has a maturity of more than one year. The balance of the note payable on December 31, 2014 is $375,000 ($500,000 - $125,000). The current portion of the note payable is $125,000, which is the amount due within one year.

Question 16

The amount of sales tax collected by a retail store when making sales is

Accepted Answer

Sales tax collected by a retail store is considered a liability because the store collects the tax on behalf of the government and is responsible for remitting it to the government. The store is not entitled to keep the sales tax collected as revenue. Therefore, it is recorded as a current liability on the store's balance sheet until it is remitted to the government.

Question 17

Hardy Company has current assets of $120,000, current liabilities of $100,000, non-current assets of $180,000 and non-current liabilities of $90,000. Hardy Company's working capital and its current ratio are

Accepted Answer

Working capital = Current assets - Current liabilities 
Working capital = $120,000 - $100,000 
Working capital = $20,000

Current ratio = Current assets / Current liabilities 
Current ratio = $120,000 / $100,000 
Current ratio = 1.20:1

Therefore, the correct answer is D.

Question 18

The current portion of long-term debt should

Accepted Answer

The current portion of long-term debt refers to the portion of a long-term debt that is expected to be repaid within the next 12 months. As such, it should be reclassified as a current liability on the balance sheet to reflect its short-term nature.

Question 19

On January 1, 2014, Howard Company, a calendar-year company, issued $1,000,000 of notes payable, of which $250,000 is due on January 1 for each of the next four years. The proper statement of financial position presentation on December 31, 2014, is

Accepted Answer

The portion of the notes payable due within one year from the statement of financial position date is considered a current liability. The remaining portion is a non-current liability. Therefore, $250,000 is classified as current liabilities ($250,000 due within one year) and the remaining $750,000 is classified as non-current liabilities ($750,000 due beyond one year).

Question 20

Layton Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $52,500. If the sales tax rate is 5%, what amount must be remitted to the taxing authority for October's sales taxes?

Accepted Answer

The answer of Layton Company does not ring up sales...

Quiz 10: Liabilities