Question 1

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be
A) $3,000.
B) $1,667.
C) $750.
D) $500.

Accepted Answer

The answer of The interest charged on a $50,000, 60-day...

Question 2

Sales taxes collected by the retailer are recorded as a(n)
A) revenue.
B) liability.
C) expense.
D) asset.

Accepted Answer

Sales taxes collected by the retailer are not revenue because they do not represent earnings from the sale of goods or services. They are also not an expense because the retailer does not incur any costs or expenses in collecting the tax. Instead, sales taxes collected are recorded as a liability because the retailer has a legal obligation to remit the tax to the appropriate government agency.

Question 3

The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be
A) $32,000.
B) $17,776.
C) $8,000.
D) $2,666.

Accepted Answer

The answer of The interest charged on a $400,000, 90-day...

Question 4

A cash register tape shows cash sales of $1,800 and sales taxes of $126. The journal entry to record this information is
a.
 $\begin{array}{lrr}
  \text {Cash  } &1,926\
 \text {Sales Revenue  } &&1,926\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {Cash  } &1,926\
 \text {Sales Taxes Payable  } &&126\
 \text { Sales Revenue } &&1,800\
\end{array}$

c.
$\begin{array}{lrr}
  \text {Cash  } &1,800\
 \text {  Sales Tax Expense.} &126\
 \text { Sales Revenue } &&1,926\
\end{array}$

d.
 $\begin{array}{lrr}
  \text { Cash } &1,926\
 \text {Sales Revenue  } &&1,800\
 \text { Sales Taxes Revenue. } &&126\
\end{array}$

Accepted Answer

The journal entry should record the cash received as well as the sales revenue and sales tax payable. Therefore, option B is correct as it records Cash 1,926, Sales Revenue 1,800 and Sales Taxes Payable 126.

Question 5

Sales taxes collected by a retailer are recorded by
A) crediting Sales Taxes Revenue.
B) debiting Sales Tax Expense.
C) crediting Sales Taxes Payable.
D) debiting Sales Taxes Payable.

Accepted Answer

Sales taxes collected by a retailer represent an obligation to remit the collected amount to the state or local government. Therefore, sales taxes should be recorded initially as a liability by crediting Sales Taxes Payable. When the retailer remits the collected taxes to the government, the Sales Taxes Payable account should be debited, and the Cash account should be credited. Option A and B are incorrect because Sales Taxes Revenue and Sales Tax Expense are not appropriate accounts to record the collection of sales taxes. Option D is incorrect because debiting Sales Taxes Payable indicates that the taxes were paid to the government, which is not the case when the retailer initially collects the taxes.

Question 6

A company receives $371, of which $21 is for sales tax. The journal entry to record the sale would include a 
A) debit to Sales Tax Expense for $21.
B) debit to Sales Taxes Payable for $21.
C) debit to Sales Revenue for $371.
D) debit to Cash for $371.

Accepted Answer

The answer of A company receives $371, of which $21...

Question 7

Ed's Bookstore has collected $750 in sales taxes during April. If sales taxes must be remitted to the state government monthly, what entry will Ed's Bookstore make to show the April remittance?
a. $\begin{array}{lrr}
  \text { Sales Taxes Payable } &750\
 \text { Cash } &&750\
\end{array}$

b.
$\begin{array}{lrr}
  \text { Sales Tax Expense } &750\
 \text {  Cash} &&750\
\end{array}$

c.
$\begin{array}{lrr}
  \text { Sales Tax Expense } &750\
 \text {Sales Taxes Payable  } &&750\
\end{array}$

d.$\begin{array}{lrr}
  \text { No entry required. } &\
\end{array}$

Accepted Answer

The remittance of sales taxes to the state government is recorded by debiting Sales Taxes Payable and crediting Cash. Option A is the only choice that reflects this. Option B records Sales Tax Expense which is not appropriate for this transaction. Option C records both Sales Tax Expense and Sales Taxes Payable which is redundant. Option D is not correct as an entry is required to record the remittance of sales taxes.

Question 8

The interest charged on a $90,000, 3-month note payable, at the rate of 8%, would be
A) $7,200.
B) $3,600.
C) $1,800.
D) $1,200.

Accepted Answer

To calculate the interest charged on the note payable, we can use the following formula:

Interest = Principal x Rate x Time

Where:
Principal = $90,000
Rate = 8% or 0.08 (in decimal)
Time = 3/12 years (since it is a 3-month note payable)

Plugging in these values, we get:

Interest = $90,000 x 0.08 x 3/12
Interest = $1,800

Therefore, the answer is C) $1,800.

Question 9

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 $630,000, what is the amount of the sales taxes owed to the taxing agency?
A) $600,000
B) $630,000
C) $31,500
D) $30,000

Accepted Answer

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

Question 10

On September 1, Joe's Painting Service borrows $150,000 from National Bank on a 4-month, $150,000, 6% note. The entry by Joe's Painting Service to record payment of the note and accrued interest on January 1 is
$\begin{array}{lrr}
  \text {Notes Payable  } &153,000\
 \text { Cash } &&153,000\\
 \text {Notes Payable  } &150,000\
 \text { Interest Payable } &3,000\
 \text { Cash } &&153,000\\
 \text { Notes Payable } &150,000\
 \text { Interest Payable } &9,000\
 \text { Cash } &&159,000\
 \text {Notes Payable  } &150,000\
 \text {  Interest Expense} &3,000\
 \text { Cash } &&153,000\

\end{array}$

Accepted Answer

The answer of On September 1, Joe's Painting Service borrows...

Question 11

On September 1, Joe's Painting Service borrows $150,000 from National Bank on a 4-month, $150,000, 6% note. What entry must Joe's Painting Service make on December 31 before financial statements are prepared?
A) Interest Payable 3,000 Interest Expense 3,000
B) Interest Expense 9,000 Interest Payable 9,000
C) Interest Expense 3,000 Interest Payable 3,000
D) Interest Expense 3,000 Notes Payable 3,000

Accepted Answer

The note has a 4-month term and was borrowed on September 1, which means it will mature on December 31. The interest expense for the note is calculated as follows:

$150,000 x 6% x 4/12 = $3,000

Therefore, on December 31, Joe's Painting Service must record the interest expense of $3,000 and the corresponding interest payable of $3,000. Choice C is the correct entry for this transaction.

Question 12

A company receives $265, of which $15 is for sales tax. The journal entry to record the sale would include a
A) debit to Sales Tax Expense for $15.
B) credit to Sales Taxes Payable for $15.
C) debit to Sales Revenue for $265.
D) debit to Cash for $250.

Accepted Answer

The answer of A company receives $265, of which $15...

Question 13

On January 1, 2015, 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 balance sheet presentation on December 31, 2015, is
A) Current Liabilities, $600,000.
B) Long-term Debt , $600,000.
C) Current Liabilities, $150,000; Long-term Debt, $450,000.
D) Current Liabilities, $450,000; Long-term Debt, $150,000.

Accepted Answer

The $150,000 due within one year (January 1, 2016) should be reported as a current liability, while the remaining $450,000 should be reported as long-term debt. Therefore, the proper balance sheet presentation on December 31, 2015, is Current Liabilities, $150,000 and Long-term Debt, $450,000.

Question 14

On January 1, 2015, Howard Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2015, is
A) Current Liabilities, $900,000.
B) Long-term Debt, $900,000.
C) Current Liabilities, $450,000; Long-term Debt, $450,000.
D) Current Liabilities, $225,000; Long-term Debt, $675,000.

Accepted Answer

The notes payable of $900,000 should be split between current and long-term liabilities based on their payment due dates. Since $225,000 is due within the next year, it should be classified as a current liability. The remaining $675,000 is not due within the next year and should be classified as long-term debt. Therefore, the proper balance sheet presentation on December 31, 2015, is Current Liabilities, $225,000; Long-term Debt, $675,000.

Question 15

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:
A) $7,155.
B) $6,726.
C) $7,584.
D) $6,750.

Accepted Answer

The answer of Crawford Company has total proceeds (before segregation...

Question 16

The interest charged on a $70,000, 2-month note payable, at the rate of 6%, would be
A) $4,200.
B) $2,100.
C) $1,050.
D) $700.

Accepted Answer

The answer of The interest charged on a $70,000, 2-month...

Question 17

On October 1, 2014, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. Assuming interest was accrued in June 30, 2015, the entry to record the payment of the note on July 1, 2015, will include a:
A) debit to Interest Expense of $2,250.
B) credit to Cash of $90,000
C) debit to Interest Payable of $6,750.
D) debit to Notes Payable of $96,750.

Accepted Answer

The answer of On October 1, 2014, Pennington Company issued...

Question 18

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?
A) $0.
B) $12,000.
C) $24,000.
D) $36,000.

Accepted Answer

The answer of Reliable Insurance Company collected a premium of...

Question 19

On October 1, 2015, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2015, the adjusting entry for accrued interest will include a:
A) credit to Notes Payable of $2,250.
B) debit to Interest Expense of $2,250
C) credit to Interest Payable of $4,500.
D) debit to Interest Expense of $3,375.

Accepted Answer

The interest on the note is calculated as follows:

Principal ($90,000) x Annual Interest Rate (10%) x Time in Fraction of a Year (3/12) = $2,250

Since the note was issued on October 1 and the financial statements are being prepared on December 31, only three months of interest have accrued.

Therefore, the adjusting entry on December 31 would involve debiting Interest Expense for $2,250 and crediting Interest Payable for $2,250. The entry would not involve Notes Payable as the principal amount of the note has not changed.

Question 20

Unearned Rent Revenue is
A) a contra account to Rent Revenue.
B) a revenue account.
C) reported as a current liability.
D) debited when rent is received in advance.

Accepted Answer

Unearned Rent Revenue is reported as a current liability because it represents rent that has been received in advance but has not yet been earned. This liability will be reduced as the rent is earned over time.

Quiz 10: Liabilities

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be

Sales taxes collected by the retailer are recorded as a(n)

The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be

Sales taxes collected by a retailer are recorded by

A company receives $371, of which $21 is for sales tax. The journal entry to record the sale would include a

The interest charged on a $90,000, 3-month note payable, at the rate of 8%, would be

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 $630,000, what is the amount of the sales taxes owed to the taxing agency?

On September 1, Joe's Painting Service borrows $150,000 from National Bank on a 4-month, $150,000, 6% note. What entry must Joe's Painting Service make on December 31 before financial statements are prepared?

A company receives $265, of which $15 is for sales tax. The journal entry to record the sale would include a

On January 1, 2015, 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 balance sheet presentation on December 31, 2015, is

On January 1, 2015, Howard Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2015, is

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:

The interest charged on a $70,000, 2-month note payable, at the rate of 6%, would be

On October 1, 2014, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. Assuming interest was accrued in June 30, 2015, the entry to record the payment of the note on July 1, 2015, will include a:

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

On October 1, 2015, Pennington Company issued a $90,000, 10%, nine-month interest-bearing note. If the Pennington Company is preparing financial statements at December 31, 2015, the adjusting entry for accrued interest will include a:

Unearned Rent Revenue is