Question 1

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 2

Advances from customers are classified as a(n)
A) revenue.
B) expense.
C) current asset.
D) current liability.

Accepted Answer

Advances from customers represent a liability to the company because they have received payment but have not yet provided the goods or services owed to the customer. Therefore, Advances from customers are classified as a current liability.

Question 3

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?
A) $280,000
B) $294,000
C) $14,700
D) $14,000

Accepted Answer

The sales revenue includes both the sales price and the sales tax. If $294,000 is the total, then $294,000 = Sales Price + 5% Sales Tax. Let Sales Price be X, then X + 0.05X = $294,000, which simplifies to 1.05X = $294,000. Solving for X gives X = $280,000. The sales tax is 5% of $280,000, which is $14,000.

Question 4

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?
A) $2,996
B) $2,800
C) $4,280
D) It cannot be determined.

Accepted Answer

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

Question 5

Working capital is
A) current assets plus current liabilities.
B) current assets minus current liabilities.
C) current assets divided by current liabilities.
D) current assets multiplied by current liabilities.

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. This gives an indication of a company's ability to meet its short-term financial obligations. Option A is incorrect because adding current liabilities to current assets would not give an accurate representation of a company's current financial position. Option C is incorrect as it would give an abstract number with no useful meaning. Option D is incorrect as it suggests that there is a relationship between current assets and current liabilities that cannot be defined simply by multiplying them together.

Question 6

Valerie's Salon has total receipts for the month of $20,670 including sales taxes. If the sales tax rate is 6%, what are Valerie's sales for the month?
A) $19,637
B) $21,910
C) $19,500
D) It cannot be determined.

Accepted Answer

To find Valerie's sales for the month, we need to divide the total receipts by 1 plus the sales tax rate (since the total receipts include the sales tax).

$20,670 ÷ 1.06 = $19,500

Therefore, Valerie's sales for the month are $19,500.

Question 7

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 8

The current ratio is
A) current assets plus current liabilities.
B) current assets minus current liabilities.
C) current assets divided by current liabilities.
D) current assets multiplied by current liabilities.

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. It shows the company's ability to pay off its short-term debts with its current assets.

Question 9

Which one of the following is shown first under current liabilities by many companies as a matter of custom?
A) Accrued expenses
B) Current maturities of long-term debt
C) Sales taxes payable
D) Notes payable

Accepted Answer

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

Question 10

The current portion of long-term debt should
A) be paid immediately.
B) be reclassified as a current liability.
C) be classified as a long-term liability.
D) not be separated from the long-term portion of debt.

Accepted Answer

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

Question 11

Layton Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $29,400. If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?
A) $1,400
B) $1,470
C) $70
D) It cannot be determined.

Accepted Answer

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

Question 12

Sales taxes collected by a retailer are expenses
A) of the retailer.
B) of the customers.
C) of the government.
D) that are not recognized by the retailer until they are submitted to the government.

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 13

Any balance in an unearned revenue account is reported as a(n)
A) current liability.
B) long-term debt.
C) revenue.
D) unearned liability.

Accepted Answer

Unearned revenue is money received by a company for goods or services that have not yet been delivered or provided. It is a liability because the company has an obligation to provide those goods or services in the future. Therefore, any balance in an unearned revenue account is reported as a current liability on the balance sheet.

Question 14

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?
A) $30,324
B) $30,400
C) $33,516
D) It cannot be determined.

Accepted Answer

Let x be the sales amount for the month.
Then, the sales tax amount is 0.05x.
The total receipts including sales taxes is $31,920, so we have:

x + 0.05x = $31,920

Simplifying the left side, we get:

1.05x = $31,920

Dividing by 1.05, we find:

x = $30,400

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

Question 15

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 16

The amount of sales tax collected by a retail store when making sales is
A) a miscellaneous revenue for the store.
B) a current liability.
C) not recorded because it is a tax paid by the customer.
D) recorded as an operating expense.

Accepted Answer

Sales tax collected by a retail store is a liability because it represents money the store owes to the state government. The store collects the tax from customers and holds it in trust until it is paid to the government.

Question 17

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?
A) Cash Unearned Service Revenue
B) Cash Service Revenue
C) Prepaid Service Fees Service Revenue
D) No entry is required when the engagement is concluded.

Accepted Answer

When the engagement is concluded and the balance is paid, it represents revenue earned by the consulting practice. Therefore, the cash received should be recorded as Cash Service Revenue. The other options (A and C) refer to prepaid or unearned revenue, which would not be appropriate in this scenario. Option D is incorrect because an entry is required to record the receipt of cash.

Question 18

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?
A) Long-term debt, $600,000.
B) Long-term debt, $450,000.
C) Long-term debt, $300,000; Long-term debt due within one year, $150,000.
D) Long-term debt, $450,000; Long-term debt due within one year, $150,000.

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, 2018 is $300,000 ($600,000 - $150,000 - $150,000). The current portion of the note payable is $150,000, which is the amount due within one year.

Question 19

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:
A) $85,000 and .95:1.
B) -$5,000 and 1.95:1.
C) $5,000 and .95:1.
D) -$5,000 and .95:1.

Accepted Answer

Working capital is calculated as current assets minus current liabilities, which is $95,000 - $100,000 = -$5,000. The current ratio is calculated as current assets divided by current liabilities, which is $95,000 / $100,000 = 0.95:1.

Question 20

Sales taxes collected by a retailer are reported as
A) contingent liabilities.
B) revenues.
C) expenses.
D) current liabilities.

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

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

Advances from customers are classified as a(n)

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?

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?

Working capital is

Valerie's Salon has total receipts for the month of $20,670 including sales taxes. If the sales tax rate is 6%, what are Valerie's sales for the month?

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?

The current ratio is

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

The current portion of long-term debt should

Layton Company does not ring up sales taxes separately on the cash register. Total receipts for October amounted to $29,400. If the sales tax rate is 5%, what amount must be remitted to the state for October's sales taxes?

Sales taxes collected by a retailer are expenses

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

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?

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?

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

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?

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?

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:

Sales taxes collected by a retailer are reported as