Question 1

Which of the following accounts is credited by the seller when tax is collected on retail sales?
A) Accounts Payable
B) Payroll Tax
C) Sales Tax Payable
D) Unearned Revenue

Accepted Answer

When tax is collected on retail sales, the seller is responsible for holding onto that tax until it is paid to the government. The account that is credited for this tax collected is Sales Tax Payable. This account is a liability account and represents the amount of sales tax owed to the government but not yet paid. So, the correct choice is C.

Question 2

Which of the following would be included in the journal entry to record the payment of sales tax payable?
A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to 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

Gem Corp. had cash sales of $10,000. The state sales tax rate is 9.8%. What amount is debited to the Cash account?
A) $10,000
B) $10,980
C) $980
D) $1,000

Accepted Answer

The state sales tax rate of 9.8% means that Gem Corp. must collect an additional $980 in sales tax ($10,000 x 0.098 = $980). Therefore, the total amount of cash that Gem Corp. would receive from these sales is $10,980 ($10,000 + $980). This is the amount that would be debited to the Cash account.

Question 4

Which of the following liabilities is created when a company receives cash for services to be provided in the future?
A) Unearned Revenue
B) Accrued Liability
C) Accounts Payable
D) Estimated Warranty Payable

Accepted Answer

Unearned Revenue is a liability that represents cash received from customers for services that have not yet been provided. This type of liability is recorded until the services are provided, after which the revenue can be recognized as earned. Accrued Liability, Accounts Payable, and Estimated Warranty Payable are all liabilities that arise from other types of transactions.

Question 5

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...

Question 6

Pluto Corp. sold goods, with a selling price of $9,021, for cash. The state sales tax rate is 10%. What amount is credited to the Sales Revenue account?
A) $9,021
B) $9,923
C) $902
D) $8,119

Accepted Answer

The Sales Revenue account is credited with the selling price of the goods sold, which is $9,021. The state sales tax rate is not included in the Sales Revenue account, as it represents a liability that needs to be paid to the state.

Question 7

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 within the operating cycle, whichever is longer. This includes accounts payable, short-term loans, and accrued expenses.

Question 8

Unearned revenue, for services to be performed in six months, appears on the balance sheet as ________.
A) long-term investments
B) current liabilities
C) current assets
D) long-term assets

Accepted Answer

Unearned revenue represents advance payments from customers for goods or services that are yet to be delivered or performed. Since the services are to be performed in six months, it is considered a current liability and would appear on the balance sheet under current liabilities.

Question 9

Barter, Inc. sold goods for $894,500 on account. The company operates in a state that imposes a 6% sales tax. What is the amount of the sales tax payable to the state?
A) $53,670
B) $26,835
C) $13,418
D) $107,340

Accepted Answer

A)
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Question 10

Cash received in advance of providing goods or performing services is recorded as ________.
A) Unearned Revenue
B) Accrued Revenue
C) Service Revenue
D) Uncollected Revenue

Accepted Answer

Cash received in advance of providing goods or performing services is recorded as unearned revenue. This is a liability account that represents the obligation of the business to provide goods or services in the future. As goods or services are provided, the unearned revenue is recognized as earned revenue and moved from the liability account to a revenue account.

Question 11

Unearned revenues are current liabilities until they are earned.

Accepted Answer

Unearned revenues are received in advance before the goods or services are provided, making them a liability until they are earned. Once the goods or services are provided, the unearned revenue becomes realized and is recognized as revenue on the balance sheet.

Question 12

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 13

Which of the following is a characteristic of a current liability?
A) It creates a present obligation for future payment of cash or services.
B) It cannot be settled with services.
C) It is an avoidable obligation.
D) It occurs because of a future transaction or event.

Accepted Answer

A current liability creates a present obligation for future payment of cash or services. Option B is incorrect as some current liabilities can be settled with services, such as wages payable to employees. Option C is incorrect as a liability is usually not avoidable. Option D is incorrect as a current liability arises from a past transaction or event but requires future payment.

Question 14

In regards to corporate income tax, which of the following statements is incorrect?
A) Federal income taxes are calculated on a corporate tax return.
B) Income Tax Expense is recorded when the federal income tax is paid.
C) When the corporation files its federal corporate tax return and makes payment, the account Income Tax Payable is credited.
D) The amount income taxes that the corporation owes but has not yet paid is classified as a current liability.

Accepted Answer

Income tax expense is recorded in the income statement based on accounting principles, regardless of whether or not the tax has been paid. The payment of the tax affects the balance sheet, reducing the balance in the Income Tax Payable account.

Question 15

The amount of income taxes ________.
A) required by the federal government for a corporation is calculated on a Form 1120
B) paid by the corporation, when it files the Form 1120, is recorded as a debit to the Income Tax Expense account and a credit to the Cash account
C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax Payable account
D) the corporation owes, but has not yet paid, is reported as a long-term liability on the balance sheet

Accepted Answer

The answer of The amount of income taxes ________.
A) required...

Question 16

On April 1, 2017, Planet Services received $14,200 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? (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)
A) Debit Service Revenue $4,733, and credit Unearned Revenue $4,733.
B) Debit Unearned Revenue $9,467, and credit Service Revenue $9,467.
C) Debit Unearned Revenue $14,200, and credit Service Revenue $14,200.
D) Debit Service Revenue $9,467, and credit Accounts Receivable $9,467.

Accepted Answer

At the end of May, Planet Services would have earned revenue for the month of April and May, which would amount to $9,467 ($14,200/3 months * 2 months). Therefore, the journal entry should adjust the unearned revenue account by reducing it by the revenue earned and increasing the service revenue account by the same amount. This can be accomplished by debiting unearned revenue $9,467 and crediting service revenue $9,467.

Question 17

Sales revenue for a sporting goods store amounted to $539,000 for the current period. All sales are on account and are subject to a sales tax of 11%. Which of the following would be included in the journal entry to record the sales transaction?
A) a debit to Sales Revenue for $539,000
B) a credit to Accounts Receivable for $539,000
C) a debit to Sales Tax Payable for $59,290
D) a debit to Accounts Receivable for $598,290

Accepted Answer

D)
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Question 18

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 19

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?
A) Debit Unearned Revenue $3,500, and credit Cash $3,500.
B) Debit Cash $3,500, and credit Service Revenue $3,500.
C) Debit Unearned Revenue $3,500, and credit Service Revenue $3,500.
D) Debit Cash $3,500, and credit Unearned Revenue $3,500.

Accepted Answer

The receipt of $3,500 in advance of performing the service represents unearned revenue, which is a liability. Thus, we debit Cash to record the receipt of cash and credit Unearned Revenue to record the liability. Therefore, the correct journal entry is Debit Cash $3,500, and credit Unearned Revenue $3,500.

Question 20

Amounts owed for products or services purchased on account are called ________.
A) accounts payable
B) unearned revenue
C) accrued expense
D) warranty payable

Accepted Answer

Amounts owed for products or services purchased on account are called accounts payable. Unearned revenue is the opposite, it is money received in advance for products or services that have not yet been delivered. Accrued expenses are expenses that have been incurred but not yet paid, and warranty payable is a liability for warranties offered by the company.

Quiz 11: Current Liabilities and Payroll

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

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

Gem Corp. had cash sales of $10,000. The state sales tax rate is 9.8%. What amount is debited to the Cash account?

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

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.

Pluto Corp. sold goods, with a selling price of $9,021, for cash. The state sales tax rate is 10%. What amount is credited to the Sales Revenue account?

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.

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

Barter, Inc. sold goods for $894,500 on account. The company operates in a state that imposes a 6% sales tax. What is the amount of the sales tax payable to the state?

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

Unearned revenues are current liabilities until they are earned.

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

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

The amount of income taxes ________.

Sales revenue for a sporting goods store amounted to $539,000 for the current period. All sales are on account and are subject to a sales tax of 11%. Which of the following would be included in the journal entry to record the sales transaction?

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

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?

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