Question 1

Emerald Jewelers is a retail store operating in Ontario, where the GST is 5% and the PST is 8%. For the month of June, Emerald sold $45,000 worth of jewelry to customers, 60% of which were cash sales and the balance paid by credit cards. Credit card fees are 2.5%. Based on this information, what is the total debit to Accounts Receivable for the month of June?
A) $50,850
B) $50,342
C) $44,550
D) $45,000

Accepted Answer

The total sales including GST and PST is $45,000 * 1.13 = $50,850. Since 40% of sales were on credit, the debit to Accounts Receivable is 40% of $50,850, which is $20,340. However, the question asks for the total debit, which includes the full sales amount including taxes, hence $50,850.

Question 2

Site Company had the following account balances related to payroll at the end of the period: $$\begin{array} { | l | r | } 
\hline \text { CPP payable - employees' share } & 7,000 \
\hline \text { Liability for income taxes withheld } & 20,000 \
\hline \text { Salary and wage expense } & 95,000 \
\hline
\end{array}$$ Without considering any employer payroll taxes, Site would record Salaries Payable for the pay period amounting to which of the following?
A) $61,000
B) $68,000
C) $75,000
D) $95,000

Accepted Answer

The answer of Site Company had the following account balances...

Question 3

GST (goods and services tax) 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

GST (Goods and Services Tax) collected by a retailer is considered an expense of the customers, as it is a tax on consumption paid by the consumer at the point of sale. The retailer collects it on behalf of the government and remits it accordingly.

Question 4

Bison Corp. issues a 5 year 8%, $60,000 note payable on March 1. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will show a:
A) debit to Notes Payable of $822.
B) debit to Cash for $1,217.
C) debit to Interest Expense for $400.
D) credit to Interest Expense for $395.

Accepted Answer

Calculation: $1,217 - ($59,183 × .08/12).

Question 5

Deferred revenue is another term for which of the following?
A) Prepaid expenses
B) Sales revenue
C) Trade payables
D) Deferred revenue

Accepted Answer

Deferred revenue is a term that refers to itself; it is money received by a company for goods or services which have not yet been delivered or performed.

Question 6

The federal government requires which of the following?
A) Only the employer to pay CPP contributions.
B) Only the employee to pay CPP contributions.
C) Neither the employer nor the employee to pay CPP contributions.
D) Both the employer and the employee to pay CPP contributions.

Accepted Answer

Both the employer and the employee are required to make contributions to the Canada Pension Plan (CPP). This is a mandatory pension plan that provides participants with a source of income upon retirement, disability, or death, with contributions shared equally between employers and employees.

Question 7

The journal entry required on the company's books to record the note payable on July 1, 20X0 would include which of the following?
A) A credit to notes payable for $12,000.
B) A credit to notes payable for $12,960.
C) A debit to cash for $11,040.
D) A debit to interest expense for $960.

Accepted Answer

The journal entry to record a note payable typically involves crediting the notes payable account for the principal amount of the note, which is $12,000 in this case.

Question 8

An employee receives a bi-weekly gross salary of $2,000. Income tax is $218, CPP is $99, EI is $36, and union dues are $50. What is the amount of the employee's take home pay (net pay) on a bi- weekly basis?
A) $1,597
B) $1,732
C) $1,782
D) $2,000

Accepted Answer

Net pay = Gross pay - (Income tax + CPP + EI + Union dues)= $2,000 - ($218 + $99 + $36 + $50)= $2,000 - $403= $1,597

Question 9

Agracon Foods distributes coupons to consumers which may be presented, on or before a stated expiry date, to grocery stores for discounts on certain Agracon products. The stores are reimbursed when they send the coupons to Agracon. In Agracon's experience, only about 50% of these coupons are redeemed. During 2011, Argracon issued two separate series of coupons as follows: $$\begin{array} { | l | r | l | r | } 
\hline&&& \text { Amounts Reimbursed as of }\
 \text { Issued On } & \text { Total Value } & \text { Coupon Expiry Date } &\operatorname{Dec} 3120X1\\ \
 \hline \text { Jan 120X1 } & \$ 250,000 & \text { Jun 30 20X1 } & \$ 118,000 \
\hline \text { Oct 120X1 } & \$ 360,000 & \text { Mar 3120X2 } &\$150,000\
\hline
\end{array}$$ Agracon's only journal entries for 20X1 recorded debits to coupon expense, and credits to cash of $268,000. Their December 31, 20X1 balance sheet should include a provision for unredeemed coupons of:
A) $180,000
B) $62,000
C) $30,000
D) $0

Accepted Answer

The answer of Agracon Foods distributes coupons to consumers which...

Question 10

On the company's 20X0 year-end statement of ﬁnancial position, the liability related to this note should be reported as which of the following?
A) A $12,480 long-term liability.
B) A $12,480 current liability.
C) A $12,000 long-term liability.
D) A $12,000 current liability.

Accepted Answer

The answer of On the company's 20X0 year-end statement of...

Question 11

The interest charged on a $200,000 note payable, at the rate of 6%, on a 3-month note would be
A) $12,000
B) $3,000
C) $4,000
D) $1,000

Accepted Answer

The interest on a note payable is calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $200,000, Rate = 6% (or 0.06 as a decimal), and Time = 3 months (or 3/12 of a year). Thus, Interest = $200,000 x 0.06 x (3/12) = $3,000.

Question 12

How should the amount of federal income tax that is withheld from employees' paychecks by the employer be recorded?
A) On the employer's books as a current liability.
B) On the employer's books as an asset.
C) On the employer's books as revenue.
D) It should not be recorded on the employer's books.

Accepted Answer

Federal income tax withheld from employees' paychecks is recorded on the employer's books as a current liability because it represents an amount the employer owes to the government.

Question 13

The amount of sales tax collected by a retail store when making sales is
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 not the store's income; it is collected on behalf of the government. Therefore, it is recorded as a current liability on the store's balance sheet until it is remitted to the government.

Question 14

A Co, a biotechnology company, reported cost of sales of $345.2 million and trade payables of $121.6 million for 20X3. In 20X2, cost of sales was $300.8 million and trade payable was $103.9 million. What was A Co's trade payables turnover ratio in 20X3?
A) 2.84
B) 2.86
C) 2.90
D) 3.06

Accepted Answer

Calculation: $345.2 ÷ [($121.6 + $103.9)/2] = 3.06.

Question 15

The current portion of long-term debt should be
A) paid immediately.
B) classified as a current liability on the statement of financial position.
C) classified as a long-term liability on the statement of financial position.
D) removed from the long-term portion of debt with a journal entry.

Accepted Answer

The current portion of long-term debt refers to the amount of debt that is due to be paid within the next year. It is classified as a current liability on the statement of financial position because it represents an obligation that needs to be settled in the short term, typically within one year.

Question 16

Carly Design Inc. received its annual property tax bill for $8,400 in January. It was paid when due on March 31. Carly Design's year end is Dec 31. The Dec 31 account balances should be
A) $2,100 for Prepaid Property Tax, $6,300 for Property Tax Expense
B) $2,100 for Prepaid Property Tax, $2,100 for Property Tax Payable
C) $0 for Prepaid Property Tax, $0 for Property Tax Payable
D) $700 for Prepaid Property Tax, $7,700 for Property Tax Expense

Accepted Answer

The answer of Carly Design Inc. received its annual property...

Question 17

In 20X3, Toys 4 U had a trade payables turnover ratio of 6.08; in 20X2, 5.87; and 5.45 in 20X1. Which statement is true about what the ratios indicate?
A) Toys 4 U is taking longer to pay its vendors in 20X3 versus 20X2.
B) Toys 4 U is taking less time to pay vendors in 20X3 than it took in both 20X2 and 20X1.
C) Toys 4 U has been increasing its average payables at a faster rate than its cost of goods sold has increased.
D) Toys 4 U is taking less time to collect from its customers.

Accepted Answer

The increasing trade payables turnover ratio from 5.45 in 20X1 to 6.08 in 20X3 indicates that Toys 4 U is paying its vendors more quickly over time.

Question 18

Interest rates on notes are usually stated as a(n)
A) monthly rate.
B) daily rate.
C) annual rate.
D) semi-annual rate.

Accepted Answer

Interest rates on notes are typically stated as an annual rate, which represents the percentage of the principal that will be charged as interest over the course of a year.

Question 19

G Co and A Co are both in the biotechnology industry. In 20X3, G Co reported a trade payables turnover of 7.71 and A Co reported a ratio of 3.06. Which of the following is an incorrect reason for the difference in ratios?
A) A Co has a higher average trade payables in comparison to G co.
B) A Co has a lower average trade payables in comparison to G co.
C) A Co is taking longer to pay vendors.
D) G Co has a better payment record in terms of timely payment to vendors.

Accepted Answer

A Co having a lower average trade payables would result in a higher trade payables turnover ratio, not a lower one.

Question 20

In 20X3, P Co reported a trade payables turnover ratio of 2.49 and C Co reported a turnover ratio of 1.74 for that same year. Which of the following statements is true?
A) C Co pays their vendors in a timelier manner than P Co pays their vendors.
B) On a comparative basis to cost sales, P Co carries more in average payables than does C Co.
C) It is unclear if P Co pays their vendors in a timelier manner than C Co.
D) P Co took approximately 147 days while C Co took about 210 days to pay vendors.

Accepted Answer

The trade payables turnover ratio is calculated as cost of goods sold divided by average trade payables. A lower ratio indicates a company takes longer to pay its vendors. To find the number of days it takes for a company to pay its vendors, you divide the number of days in a year (365) by the turnover ratio. For P Co, it's 365 / 2.49 ≈ 147 days. For C Co, it's 365 / 1.74 ≈ 210 days. Therefore, P Co pays its vendors faster than C Co.

Quiz 9: Long-Lived Tangible and Intangible Assets

GST (goods and services tax) collected by a retailer are expenses

Bison Corp. issues a 5 year 8%, $60,000 note payable on March 1. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will show a:

Deferred revenue is another term for which of the following?

The federal government requires which of the following?

The journal entry required on the company's books to record the note payable on July 1, 20X0 would include which of the following?

An employee receives a bi-weekly gross salary of $2,000. Income tax is $218, CPP is $99, EI is $36, and union dues are $50. What is the amount of the employee's take home pay (net pay) on a bi- weekly basis?

On the company's 20X0 year-end statement of ﬁnancial position, the liability related to this note should be reported as which of the following?

The interest charged on a $200,000 note payable, at the rate of 6%, on a 3-month note would be

How should the amount of federal income tax that is withheld from employees' paychecks by the employer be recorded?

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

A Co, a biotechnology company, reported cost of sales of $345.2 million and trade payables of $121.6 million for 20X3. In 20X2, cost of sales was $300.8 million and trade payable was $103.9 million. What was A Co's trade payables turnover ratio in 20X3?

The current portion of long-term debt should be

Carly Design Inc. received its annual property tax bill for $8,400 in January. It was paid when due on March 31. Carly Design's year end is Dec 31. The Dec 31 account balances should be

In 20X3, Toys 4 U had a trade payables turnover ratio of 6.08; in 20X2, 5.87; and 5.45 in 20X1. Which statement is true about what the ratios indicate?

Interest rates on notes are usually stated as a(n)

G Co and A Co are both in the biotechnology industry. In 20X3, G Co reported a trade payables turnover of 7.71 and A Co reported a ratio of 3.06. Which of the following is an incorrect reason for the difference in ratios?

In 20X3, P Co reported a trade payables turnover ratio of 2.49 and C Co reported a turnover ratio of 1.74 for that same year. Which of the following statements is true?