Question 1

Maple Street Bookstore has collected $1500 in sales taxes during April. If sales taxes must be remitted to the state government monthly what entry will Maple Street Bookstore make to show the April remittance? a. 
$\begin{array}{lrr}
  \text { Sales Taxes Payable } &1,500\
 \text { Cash } &&1,500\
\end{array}$

b.
$\begin{array}{lrr}
  \text { Sales Tax Expense  } &1,500\
 \text { Cash } &&1,500\
\end{array}$

c. 
$\begin{array}{lrr}
  \text { Sales Tax Expense  } &1,500\
 \text { Sales Taxes Payable } &&1,500\
\end{array}$

d. $\text {No entry required.}$

Accepted Answer

The answer of Maple Street Bookstore has collected $1500 in...

Question 2

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

Accepted Answer

Sales taxes collected by the retailer are a liability because the retailer collects them on behalf of the government and is responsible for remitting them to the appropriate government agency. The retailer is essentially holding these funds in trust for the government until they are remitted.

Question 3

On September 1 Bud's Painting Service borrows $150000 from Highlands Bank on a 4-month $150000 6% note. What entry must Bud's Painting Service make on December 31 before financial statements are prepared? a. 
$\begin{array}{lrr}
  \text { Interest Payable } &3,000\
 \text { Interest Expense  } &&3,000\
\end{array}$

b.
$\begin{array}{lrr}
  \text {  Interest Expense } &9,000\
 \text {Interest Payable  } &&9,000\
\end{array}$

c.
$\begin{array}{lrr}
  \text {  Interest Expense } &3,000\
 \text { Interest Payable } &&3,000\
\end{array}$

d. 
$\begin{array}{lrr}
  \text {  Interest Expense } &3,000\
 \text {  Notes Payable } &&3,000\
\end{array}$

Accepted Answer

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

Question 4

On January 1 2017 Mazzeo Company a calendar-year company issued $1600000 of notes payable of which $400000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31 2017 is

Accepted Answer

The $400,000 due in the coming year is classified as current, and the remaining $1,200,000 ([$1,600,000 total – $400,000 current portion] = $1,200,000) is classified as long-term debt. Therefore, the proper balance sheet presentation on December 31, 2017, is Current Liabilities $400,000, and Long-term Debt $1,200,000.

Question 5

On January 1 2017 Key Company a calendar-year company issued $250000 of notes payable of which $62500 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31 2017 is

Accepted Answer

The portion of the notes payable due within one year (January 1, 2018) should be classified as current liabilities ($62,500). The remaining portion ($187,500) should be classified as long-term debt. Therefore, the proper balance sheet presentation on December 31, 2017 should show Current Liabilities of $62,500 and Long-Term Debt of $187,500.

Question 6

Koppernaes Company has total proceeds (before segregation of sales taxes) from sales of $9540. If the sales tax is 6% the amount to be credited to the account Sales Revenue is:

Accepted Answer

To find the amount credited to Sales Revenue, divide the total proceeds by 1 plus the sales tax rate: $9540 / 1.06 = $9000.

Question 7

A cash register tape shows cash sales of $3000 and sales taxes of $240. The journal entry to record this information is

Accepted Answer

Option A is incorrect as it does not account for the sales taxes separately. Option C is incorrect as it shows Sales Tax Expense instead of Sales Taxes Payable. Option D is incorrect as it shows Sales Tax Revenue instead of Sales Taxes Payable. 
Option B correctly records the Cash received, Sales Revenue, and Sales Taxes Payable separately. Therefore, Option B is the best choice.

Question 8

The interest charged on a $50000 note payable at the rate of 6% on a 60-day note would be

Accepted Answer

The interest is calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $50,000, Rate = 6% per annum, and Time = 60/365 years. So, Interest = $50,000 x 0.06 x (60/365) = $500.

Question 9

A retail store does not segregate sales and the amount of sales tax on sales. If the sales tax rate is 5% and the register total amounted to $262500 what is the amount of the sales taxes owed to the taxing agency?

Accepted Answer

To find the sales tax, divide the total amount by 1.05 (since the total includes the sales tax) to find the sales amount, then multiply by 0.05. $262500 / 1.05 = $250000 (sales amount), and $250000 * 0.05 = $12500 (sales tax).

Question 10

Mackenzie Insurance Company collected a premium of $15000 for a 1-year insurance policy on May 1. What amount should Mackenzie report as a current liability for Unearned Insurance Revenue at December 31?

Accepted Answer

The insurance policy covers a 12-month period from May 1, meaning 8 months have passed by December 31, leaving 4 months of coverage unearned. The unearned portion is $5,000 ($15,000 annual premium divided by 12 months, multiplied by the 4 remaining months).

Question 11

A company receives $696 of which $56 is for sales tax. The journal entry to record the sale would include a a debit to Sales Tax Expense for $56.
B) debit to Sales Taxes Payable for $56.
C) debit to Sales Revenue for $696.
D) debit to Cash for $696.

Accepted Answer

The answer of A company receives $696 of which $56...

Question 12

On October 1 2017 Dakota Company issued an $800000 10% nine-month interest-bearing note. If the Dakota Company is preparing financial statements at December 31 2017 the adjusting entry for accrued interest will include a:

Accepted Answer

The interest for three months (October, November, December) on an $800,000 note at 10% annual interest is calculated as $800,000 * 10% * (3/12) = $20,000. This amount represents the interest expense for the period and should be debited to Interest Expense.

Question 13

The interest charged on a $400000 note payable at the rate of 8% on a 90-day note would be

Accepted Answer

The answer of The interest charged on a $400000 note...

Question 14

On September 1 Eli's Painting Service borrows $150000 from National Bank on a 4-month $150000 6% note. The entry by Eli's Painting Service to record payment of the note and accrued interest on January 1 is a. 
$\begin{array}{lrr}
  \text {Notes Payable  } &153,000\
 \text {  Cash } &&153,000\
\end{array}$

b. 
$\begin{array}{lrr}
  \text { Notes Payable } &150,000\
 \text {  Interest Payable} &3,000\
 \text {   Cash} &&153,000
\end{array}$

c.
$\begin{array}{lrr}
  \text {Notes Payable  } &150,000\
 \text {  Interest Payable} &9,000\
 \text { Cash  } &&159,000
\end{array}$

d.
$\begin{array}{lrr}
  \text {  Notes Payable} &150,000\
 \text { Interest Expense  } &3,000\
 \text {  Cash } &&153,000
\end{array}$

Accepted Answer

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

Question 15

Sales taxes collected by a retailer are recorded by

Accepted Answer

Sales taxes collected by a retailer are not revenue for the retailer; instead, they are liabilities because the retailer owes this money to the government. Therefore, they are recorded by crediting Sales Taxes Payable, indicating an increase in the liability account.

Question 16

The interest charged on a $100000 note payable at the rate of 6% on a 2-month note would be

Accepted Answer

The interest on a note payable is calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $100,000, Rate = 6% (or 0.06 as a decimal), and Time = 2/12 year (since it's for 2 months and there are 12 months in a year). So, Interest = $100,000 x 0.06 x 2/12 = $1,000.

Question 17

A company receives $396 of which $36 is for sales tax. The journal entry to record the sale would include a

Accepted Answer

The correct journal entry to record the sale would include a credit to Sales Taxes Payable for $36, reflecting the liability to remit the collected sales tax to the appropriate tax authority.

Question 18

The interest charged on a $225000 note payable at the rate of 8% on a 3-month note would be

Accepted Answer

The interest for a 3-month note is calculated as: Principal x Rate x Time = $225,000 x 0.08 x (3/12) = $4,500.

Question 19

On October 1 2016 Pennington Company issued an $800000 10% nine-month interest-bearing note. Assuming interest was accrued in June 30 2017 the entry to record the payment of the note on July 1 2017 will include a:

Accepted Answer

The entry to record the payment of the note will include a debit to Interest Payable of $60,000, which represents the interest accrued over the nine-month period.

Question 20

Unearned Rent Revenue is

Accepted Answer

Unearned Rent Revenue represents rent that has been received in advance but has not yet been earned by the company. As the company has not yet provided the service, the revenue cannot be recognized and must be reported as a current liability on the balance sheet until the service is provided. Therefore, choice C is the correct answer as it accurately describes Unearned Rent Revenue.

Quiz 11: Current Liabilities and Payroll Accounting