Question 1

Any portion of a long-term liability that is due with the next year is reported as a current liability.

Accepted Answer

This is called the current portion of long-term debt and is reported as a current liability on the balance sheet.

Question 2

Mars Corp. had cash sales of $10,000. The state sales tax rate is 10.8%. What amount is debited to the Cash account?
A) $10,000
B) $11,080
C) $1080
D) $1000

Accepted Answer

The amount debited to the Cash account includes both the sales amount and the sales tax collected. Therefore, the total cash received is $10,000 (sales) + $1,080 (10.8% of $10,000 as sales tax) = $11,080.

Question 3

Which of the following statements regarding Accounts Payable is incorrect?
A) The Accounts Payable account is decreased with a credit.
B) Accounts payable occur because the business receives the goods or services before payment has been made.
C) Because accounts payable are typically due in 30 days, they are current liabilities.
D) Accounts payable represent debts owed to creditors.

Accepted Answer

Accounts Payable is increased with a credit and decreased with a debit, opposite to the assertion in choice A. This is because Accounts Payable is a liability account, and the increase or decrease in liabilities is recorded with credits and debits, respectively.

Question 4

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

Sales Tax Payable is the account that is credited when tax is collected on retail sales. This account is a liability account on the seller's balance sheet because it represents an obligation to remit the taxes collected to the appropriate tax authority.

Question 5

The federal government is the only entity that requires corporations to pay income tax on their net income.

Accepted Answer

State governments also require corporations to pay income tax on their net income, in addition to the federal government.

Question 6

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

Accepted Answer

Amounts owed for products or services purchased on account are accounts payable. Accounts receivable represent the money that is owed to a company by its customers for products or services sold on account.

Question 7

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

Accounts payable is the specific term used to describe amounts owed for products or services purchased on account. Unearned revenue refers to payments received for products or services not yet provided. Accrued expenses refer to expenses that have been incurred but not yet paid. Warranty payable refers to the amount a company owes due to product warranties offered to customers.

Question 8

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 those that are expected to be settled within one year or within the entity's operating cycle, whichever is longer. They can be paid either using cash, goods, or services.

Question 9

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. It is a known and definite obligation that must be settled within the year. Choices B and C are incorrect because current liabilities can be settled with services, and they are not avoidable obligations. Choice D is incorrect because a current liability arises from a past transaction or event, not a future one.

Question 10

Sales Tax Payable is usually calculated as a percentage of the amount of the sale.

Accepted Answer

Sales Tax Payable is typically calculated as a percentage of the amount of the sale, depending on the location and tax laws.

Question 11

The IFRS definitions of current and long-term liabilities are much different than the U.S. GAAP definitions.

Accepted Answer

The IFRS and U.S. GAAP definitions of current and long-term liabilities are similar, both categorizing liabilities based on their due date, with current liabilities due within one year and long-term liabilities due after one year. Differences between IFRS and U.S. GAAP are more about specific recognition, measurement, and disclosure requirements rather than the fundamental definitions of current and long-term liabilities.

Question 12

Income tax payable represents the amount of taxes that a corporation owes but has not yet paid.

Accepted Answer

Income tax payable is a current liability on a corporation's balance sheet, representing the taxes that are owed to the government but have not yet been paid.

Question 13

Sales revenue for a sporting goods store amounted to $526,000 for the current period. All sales are on account and are subject to a sales tax of 10%. Which of the following would be included in the journal entry to record the sales transaction?
A) a debit to Sales Revenue for $526,000
B) a credit to Accounts Receivable for $526,000
C) a debit to Sales Tax Payable for $52,600
D) a debit to Accounts Receivable for $578,600

Accepted Answer

11ea8873_d49c_4945_bb89_99d8028cee1c_TB5026_00

Question 14

Venus Corp. sold goods, with a selling price of $17,221, for cash. The state sales tax rate is 8%. What amount is credited to the Sales Revenue account? (Round calculations to the nearest dollar.)
A) $17,221
B) $18,599
C) $1378
D) $15,843

Accepted Answer

The amount credited to the Sales Revenue account is the selling price of the goods before sales tax, which is $17,221. Sales tax is collected on behalf of the government and is not part of sales revenue.

Question 15

Modern Age, Inc. made total cash sales in February of $666,000, which are subject to 7.5% sales tax. Prepare the summary entry to record the transaction. Omit explanation.

Accepted Answer

The answer of Modern Age, Inc. made total cash sales...

Question 16

Because amounts owed for products or services on account are typically due in 60 days, they are current liabilities.

Accepted Answer

Because amounts owed for products or services on account are typically due in 30 days, they are current liabilities.

Question 17

Restaurant 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. Omit explanation.

Accepted Answer

The answer of Restaurant Foods Corp. had cash sales of...

Question 18

Barron, Inc. sold goods for $883,500 on account. The company operates in a state that imposes a 9% sales tax. What is the amount of the sales tax payable to the state?
A) $79,515
B) $39,758
C) $19,879
D) $159,030

Accepted Answer

The sales tax payable is calculated by multiplying the total sales amount by the sales tax rate. Therefore, $883,500 * 9% = $79,515.

Question 19

Sales tax is an expense of the business.

Accepted Answer

Sales tax is collected by the business on behalf of the government from customers at the point of sale and is not an expense of the business; it is a liability until remitted to the government.

Question 20

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 (reduce) the Sales Tax Payable account to reflect the payment of the liability.

Quiz 11: Current Liabilities and Payroll

Any portion of a long-term liability that is due with the next year is reported as a current liability.

Mars Corp. had cash sales of $10,000. The state sales tax rate is 10.8%. What amount is debited to the Cash account?

Which of the following statements regarding Accounts Payable is incorrect?

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

The federal government is the only entity that requires corporations to pay income tax on their net income.

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

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

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.

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

Sales Tax Payable is usually calculated as a percentage of the amount of the sale.

The IFRS definitions of current and long-term liabilities are much different than the U.S. GAAP definitions.

Income tax payable represents the amount of taxes that a corporation owes but has not yet paid.

Sales revenue for a sporting goods store amounted to $526,000 for the current period. All sales are on account and are subject to a sales tax of 10%. Which of the following would be included in the journal entry to record the sales transaction?

Venus Corp. sold goods, with a selling price of $17,221, for cash. The state sales tax rate is 8%. What amount is credited to the Sales Revenue account? (Round calculations to the nearest dollar.)

Modern Age, Inc. made total cash sales in February of $666,000, which are subject to 7.5% sales tax. Prepare the summary entry to record the transaction. Omit explanation.

Because amounts owed for products or services on account are typically due in 60 days, they are current liabilities.

Restaurant 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. Omit explanation.

Barron, Inc. sold goods for $883,500 on account. The company operates in a state that imposes a 9% sales tax. What is the amount of the sales tax payable to the state?

Sales tax is an expense of the business.

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