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?

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?

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

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:

Accepted Answer

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

Question 5

Deferred revenue is another term for which of the following?

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?

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?

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?

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:

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?

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

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?

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

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?

Accepted Answer

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

Question 15

The current portion of long-term debt should be

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

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?

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)

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?

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?

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