Question 1

A company receives $297, of which $27 is for PST (provincial sales tax). The journal entry to record the sale would include a

Accepted Answer

The $27 portion of the sale is a liability that the company owes to the government for collecting the PST. Therefore, the journal entry should include a credit to Sales Tax Payable for $27. The other choices are incorrect because Sales Tax Expense is an account used to record the expense of sales tax paid by the company, Sales is the total amount of the sale, and Cash is the amount of money the company received.

Question 2

As interest is recorded on a bank loan payable, the Interest Expense account is

Accepted Answer

Interest expense is recorded as an increase in the Interest Expense account and an increase in the Interest Payable account, reflecting the obligation to pay interest.

Question 3

Use the following information for questions 
On October 1, 2012, Carla's Carpet Service Limited borrows $80,000 from Regional Bank by signing a 3-month, $80,000, 4% bank loan. Interest is due the first of each month.
-What adjusting entry is required at December 31, 2012?

Accepted Answer

The answer of Use the following information for questions 
On...

Question 4

The total interest charged on a 5%, $300,000 four-month bank loan payable would be

Accepted Answer

The answer of The total interest charged on a 5%,...

Question 5

A current liability is a debt that can reasonably be expected to be paid

Accepted Answer

A current liability is a debt that can be expected to be paid within one year or the operating cycle, whichever is longer.

Question 6

Failure to record a liability will probably

Accepted Answer

Failure to record a liability means that the expense related to that liability has not been recognized, which leads to an understatement of expenses and an overstatement of profit.

Question 7

Most companies pay current liabilities

Accepted Answer

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer. Most companies pay these liabilities out of their current assets, such as cash or short-term investments. Option B and C are not typically used to pay current liabilities, and option D creates long-term liabilities rather than paying current ones.

Question 8

Dream Design Inc. received its annual property tax bill for $16,800 in January. It was paid when due on March 31. Dream Design's year end is Dec 31. The Dec 31 balances should be

Accepted Answer

The answer of Dream Design Inc. received its annual property...

Question 9

Current liabilities are

Accepted Answer

Current liabilities are debts or obligations that are expected to be settled within one year or within the normal operating cycle of a business, whichever is longer. Therefore, choice D, payable within one year, is the correct answer.

Question 10

Which of the following would most likely be classified as a current liability?

Accepted Answer

Dividends payable are payments due to shareholders for their ownership in the company and are typically paid out within a relatively short time frame, making them a current liability. Choice A is a long-term liability and Choices B and C are not liabilities but rather financing activities.

Question 11

A customer paid a total of $8,960 for a purchase, including 12% HST (Harmonized Sales Tax). How much was the HST?

Accepted Answer

The HST is 12% of the pre-tax amount. Let x be the pre-tax amount. Then x + 0.12x = $8,960. Solving for x gives x = $8,000. The HST is 0.12 * $8,000 = $960.

Question 12

Layton Inc. had an operating line of credit of $100,000 and overdrew its bank balance to result in a negative cash balance of $15,000 at year-end. This would be reported in the statement of financial position as

Accepted Answer

The negative cash balance represents an overdrawn amount on the operating line of credit, indicating a current liability. Therefore, the statement of financial position should report this as a current liability of $15,000.

Question 13

Use the following information for questions 
On October 1, 2012, Carla's Carpet Service Limited borrows $80,000 from Regional Bank by signing a 3-month, $80,000, 4% bank loan. Interest is due the first of each month.
-The entry by Carla's Carpet Service to record payment of the loan and accrued interest on January 1, 2013 is

Accepted Answer

The answer of Use the following information for questions 
On...

Question 14

GST (goods and services tax) collected by a retailer is recorded by

Accepted Answer

GST collected by a retailer is a liability until it is remitted to the government. Therefore, it should be recorded by crediting Sales Tax Payable.

Question 15

Use the following information for questions 
On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity.
-The entry made by Tilbury Corp on January 1 to record the receipt of the loan is

Accepted Answer

The answer of Use the following information for questions 
On...

Question 16

Very often, failure to record a liability means failure to record a(n)

Accepted Answer

Failure to record a liability means failure to record an expense, as a liability represents a future obligation or debt to be paid, which is typically accompanied by an expense.

Question 17

Use the following information for questions 
On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity.
-What is the adjusting entry required if Tilbury Corp prepares financial statements on June 30?

Accepted Answer

The answer of Use the following information for questions 
On...

Question 18

Interest expense on a note payable, with interest due at maturity, is

Accepted Answer

Interest expense on a note payable with interest due at maturity is accrued over the life of the note. This means that interest expense is recognized as the note is outstanding and not just at the time of issuance or maturity.

Question 19

Sales tax collected by a retail store when making sales is

Accepted Answer

Sales tax collected by a retail store is a current liability because it is collected by the store from customers but not yet remitted to the government.

Question 20

Use the following information for questions 
On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity.
-What entry will Tilbury Corp make to repay the loan on September 30, assuming no further adjusting entries have been made since June 30?

Accepted Answer

The answer of Use the following information for questions 
On...

Quiz 10: Reporting and Analyzing Liabilities

A company receives $297, of which $27 is for PST (provincial sales tax) . The journal entry to record the sale would include a

As interest is recorded on a bank loan payable, the Interest Expense account is

Use the following information for questions On October 1, 2012, Carla's Carpet Service Limited borrows $80,000 from Regional Bank by signing a 3-month, $80,000, 4% bank loan. Interest is due the first of each month. -What adjusting entry is required at December 31, 2012?

The total interest charged on a 5%, $300,000 four-month bank loan payable would be

A current liability is a debt that can reasonably be expected to be paid

Failure to record a liability will probably

Most companies pay current liabilities

Dream Design Inc. received its annual property tax bill for $16,800 in January. It was paid when due on March 31. Dream Design's year end is Dec 31. The Dec 31 balances should be

Current liabilities are

Which of the following would most likely be classified as a current liability?

A customer paid a total of $8,960 for a purchase, including 12% HST (Harmonized Sales Tax) . How much was the HST?

Layton Inc. had an operating line of credit of $100,000 and overdrew its bank balance to result in a negative cash balance of $15,000 at year-end. This would be reported in the statement of financial position as

GST (goods and services tax) collected by a retailer is recorded by

Use the following information for questions On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity. -The entry made by Tilbury Corp on January 1 to record the receipt of the loan is

Very often, failure to record a liability means failure to record a(n)

Use the following information for questions On January 1 of this year, Saratoga Bank agrees to lend Tilbury Corp. $150,000. Tilbury Corp. signs a $150,000, 4%, 9-month loan. Interest is due at maturity. -What is the adjusting entry required if Tilbury Corp prepares financial statements on June 30?

Interest expense on a note payable, with interest due at maturity, is

Sales tax collected by a retail store when making sales is