Question 1

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 $294,000, 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 2

Advances from customers are classified as a(n)

Accepted Answer

Advances from customers are payments received in advance of goods or services being provided. Therefore, they are a liability because the company owes the customer the goods or services. Specifically, they are classified as a current liability if they are expected to be fulfilled within a year.

Question 3

Sales taxes collected by a retailer are expenses

Accepted Answer

Sales taxes collected by a retailer are considered liabilities to the government but are expenses of the customers, as they are the ones who ultimately bear the cost. The retailer acts merely as a collector and remitter of these taxes to the government.

Question 4

The current ratio is

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, giving a measure of a company's ability to pay off its short-term debts using its current assets.

Question 5

Hardy Company has current assets of $95,000, current liabilities of $100,000, long-term assets of $180,000 and long-term liabilities of $80,000. Hardy Company's working capital and its current ratio are:

Accepted Answer

The answer of Hardy Company has current assets of $95,000,...

Question 6

Current liabilities generally appear

Accepted Answer

The answer of Current liabilities generally appear
...

Question 7

The current portion of long-term debt should

Accepted Answer

The current portion of long-term debt represents the portion of the debt that is due within the next 12 months. As such, it should be reclassified as a current liability on the balance sheet to accurately reflect the company's short-term obligations.

Question 8

Working capital is

Accepted Answer

Working capital is defined as the difference between a company's current assets and current liabilities. Therefore, the correct choice is B, current assets minus current liabilities.

Question 9

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

Accepted Answer

Sales tax collected by a retail store is not revenue for the store as it is a tax collected on behalf of the government. It is also not an operating expense as it is not directly related to the store's operations. Instead, it is a current liability as the store has collected the tax from customers but has not yet paid it to the government.

Question 10

Which one of the following is shown first under current liabilities by many companies as a matter of custom?

Accepted Answer

The answer of Which one of the following is shown...

Question 11

Jim's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim's Pharmacy make to show the March remittance?

Accepted Answer

The answer of Jim's Pharmacy has collected $600 in sales...

Question 12

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 13

Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $15 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 14

Hilton Company issued a four-year interest-bearing note payable for $600,000 on January 1, 2017. Each January the company is required to pay $150,000 on the note. How will this note be reported on the December 31, 2018 balance sheet?

Accepted Answer

The answer of Hilton Company issued a four-year interest-bearing note...

Question 15

Employee payroll deductions include each of the following except

Accepted Answer

All of the choices listed are examples of employee payroll deductions except for federal unemployment taxes, which are paid solely by the employer.

Question 16

Oakley Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $42,800. If the sales tax rate is 7%, what amount must be remitted to the state for February's sales taxes?

Accepted Answer

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

Question 17

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

Accepted Answer

An unearned revenue account represents money paid by a customer for goods or services that have not yet been provided. This means that the obligation to provide the goods or services is still outstanding, and the amount paid is considered a liability until the goods or services are provided. As such, any balance in an unearned revenue account is reported as a current liability on the balance sheet.

Question 18

Julie's Boutique has total receipts for the month of $31,920 including sales taxes. If the sales tax rate is 5%, what are Julie's sales for the month?

Accepted Answer

Let x be the sales for the month.
Then we can set up the equation:
x + 0.05x = 31,920
Simplifying:
1.05x = 31,920
x = 30,400

Therefore, Julie's sales for the month were $30,400.

Question 19

Kelly Rice has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Rice account for the cash received at the end of the engagement?

Accepted Answer

The answer of Kelly Rice has a large consulting practice....

Question 20

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.

Quiz 10: Liabilities