Question 1

Which of the following liabilities is created when a company receives cash for services to be provided in the future?

Accepted Answer

When a company receives cash for services that are to be provided in the future, they have not yet earned the revenue. Therefore, the liability created is unearned revenue.

Question 2

Which of the following would be included in the journal entry to record the payment of sales tax payable?

Accepted Answer

When paying off sales tax payable, the company would debit (decrease) the Sales Tax Payable account to reflect the payment of the liability.

Question 3

Barter,Inc.sold goods for $883,500 on account.The company operates in a state that imposes a 9% sales tax.What is the amount of the sales tax payable to the state?

Accepted Answer

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Question 4

Sales revenue for a sporting goods store amounted to $526,000 for the current period.All sales are on account and are subject to a sales tax of 10%.Which of the following would be included in the journal entry to record the sales transaction?

Accepted Answer

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Question 5

Unearned revenue,for services to be performed in six months,appears on the balance sheet as ________.

Accepted Answer

Unearned revenue represents a liability, as it is money received in advance for services that have not yet been performed. Current liabilities are obligations that are due within one year. Therefore, unearned revenue for services to be performed in six months would appear on the balance sheet as a current liability.

Question 6

Amounts owed for products or services purchased on account are called ________.

Accepted Answer

Amounts owed for products or services purchased on account are called accounts payable.

Question 7

Which of the following accounts is credited by the seller when tax is collected on retail sales?

Accepted Answer

When tax is collected on retail sales, the seller credits the Sales Tax Payable account. This account represents the amount of sales tax collected from customers that has not yet been paid to the government.

Question 8

On August 31,2016,Peter Services received $3,500 in advance of performing the service.Which journal entry is needed to record the receipt of cash?

Accepted Answer

When cash is received in advance of services being provided, it is recorded as a liability (Unearned Revenue) until the services are performed. Therefore, the journal entry is to debit Cash and credit Unearned Revenue. Choice D reflects this approach, while the other options do not correctly record the transaction.

Question 9

Which of the following is a characteristic of a current liability?

Accepted Answer

A current liability creates a present obligation for future payment of cash or services.

Question 10

Pluto Corp.sold goods,with a selling price of $17,221,for cash.The state sales tax rate is 8%.What amount is credited to the Sales Revenue account?

Accepted Answer

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Question 11

Cash received in advance of providing goods or performing services is recorded as ________.

Accepted Answer

Cash received in advance of providing goods or performing services is recorded as unearned revenue on the balance sheet. This is a liability account until the goods are delivered or services are performed, at which point it is recognized as revenue on the income statement.

Question 12

Unearned revenues are current liabilities until they are earned.

Accepted Answer

Unearned revenues are payments received in advance for goods or services that have not yet been provided. They are considered current liabilities because the company has an obligation to provide the goods or services in the future. Once the goods or services are provided, the unearned revenue is then recognized as revenue and moved from a liability to an asset account.

Question 13

Amounts owed for products or services purchased on account are accounts receivable.

Accepted Answer

Amounts owed for products or services purchased on account are referred to as accounts payable. Accounts receivable represent amounts owed to a company by its customers for products or services sold on account.

Question 14

In regards to corporate income tax,which of the following statements is incorrect?

Accepted Answer

Income Tax Expense is recorded when the federal income tax is incurred.

Question 15

Applied Foods Corp.had cash sales of $598,000 during the month of August.Sales taxes of 6.5% were collected on the sales.Prepare the journal entry to record the sales revenue and sales tax for the month.

Accepted Answer

The answer of Applied Foods Corp.had cash sales of $598,000...

Question 16

On April 1,2017,Planet Services received $8,000 in advance of performing the services from a customer for three months of service - April,May and June.What would be the journal entry to adjust the accounts at the end of May?

Accepted Answer

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Question 17

Corrections Services sells service plans for commercial computer maintenance.The price for each plan is $1,350 per year,paid in advance.On October 1,2016,a service plan was sold to a new customer for cash,and the plan covers the period October 1,2016 to September 30,2017.Adjusting entries are made on December 31 of each year.Prepare the journal entry for September 30,2017.

Accepted Answer

The answer of Corrections Services sells service plans for commercial...

Question 18

Gem Corp.had cash sales of $10,000.The state sales tax rate is 10.8%.What amount is debited to the Cash account?

Accepted Answer

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Question 19

The amount of income taxes ________.

Accepted Answer

The answer of The amount of income taxes ________.
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Question 20

Current liabilities must be paid either in cash or with goods and services within one year or within the entity's operating cycle,if the cycle is longer than a year.

Accepted Answer

Current liabilities are obligations that must be settled within one year or one operating cycle, whichever is longer. They are typically paid with cash or goods and services.

Quiz 11: Current Liabilities and Payroll